Once you’ve refined your business idea, the next step is to make it official. Establishing your company in Colorado involves several important tasks: selecting a business structure, picking an available name, obtaining necessary licenses and permits, and registering for state taxes.
This guide provides a step-by-step walkthrough for creating a Colorado business. It explains the requirements and identifies the relevant agencies you’ll need to contact to register a business properly in Colorado.
Related: Starting A Business In Colorado Checklist
Step 1: Choose a Business Structure
Choosing a business structure, also known as selecting a business entity, is the first step in registering a new business in Colorado. This choice shapes many aspects of your company’s future, including legal and financial responsibilities.
Colorado has five business structures: sole proprietorship, general partnership, limited partnership, corporation, and Limited Liability Company (LLC). Each has distinct characteristics and implications for business operations.
Related: Comparison of Business Structures
Sole Proprietorship
Sole proprietorships are the simplest form, owned and operated by one individual responsible for all aspects of the business. While easy to set up with minimal regulatory requirements, this structure exposes the owner to unlimited personal liability for business debts and obligations. Despite this risk, sole proprietorships can be attractive for small or low-risk ventures due to their simplicity and low setup costs.
Related: How to Start a Sole Proprietorship in Colorado
General Partnership
General partnerships involve two or more individuals agreeing to run a business together, sharing profits, losses, and management duties. In Colorado, general partnerships can be formed without formal state filings, though a written agreement is advisable. Like sole proprietorships, partners bear personal liability for business debts and liabilities.
Corporation
Corporations offer a more complex structure, existing as separate legal entities from their shareholders. This provides limited liability protection, shielding personal assets from business debts. Forming a corporation in Colorado requires filing Articles of Incorporation with the Colorado Secretary of State and adhering to more stringent regulations than simpler business structures.
Related: How to Form a Colorado Corporation
Limited Partnership (LP)
A Colorado Limited Partnership is a specialized business structure that combines elements of general partnerships and corporations. It consists of at least one general partner who manages the business and assumes personal liability for the partnership’s debts and one or more limited partners who invest capital but have limited involvement in management and limited liability.
Limited Liability Company (LLC)
A Colorado Limited Liability Company blends elements of corporations and sole proprietors or general partnerships. The LLC offers the limited liability protection of a corporation while maintaining the ease of administration and tax flexibility of a partnership or sole proprietorship. To establish an LLC in Colorado, you will file Articles of Organization with the Colorado Secretary of State.
Related: How to Form a Colorado LLC
Step 2: Select a Business Name
Once the business structure is figured out, the next step is to select a business name. The process is different depending on which structure is going to be used.
For sole proprietorships and partnerships operating under a name different from the full legal name(s) of the owner(s), registration of a Colorado Statement of Trade Name, also known as a “Doing Business As” (DBA) name, is necessary. The trade name registration is filed online with the Colorado Secretary of State.
Corporations and Limited Liability Companies (LLCs) establish their names during the entity formation process. These names must be unique and distinguishable from other registered business names in Colorado. Before finalizing your choice, it’s advisable to conduct a Colorado name search through the Secretary of State’s database to ensure availability.
Step 3: Federal Employer Identification Number (FEIN)
The Federal Employer Identification Number (FEIN), also called the Federal Tax Identification Number, is a unique nine-digit code the Internal Revenue Service (IRS) assigns to businesses. This number serves a similar purpose for companies as a Social Security number does for individuals, primarily for tax filing and reporting.
Most businesses will need to acquire an EIN, though sole proprietors and single-member LLCs without employees can use the owner’s Social Security number instead.
Colorado businesses can obtain an EIN at no cost by applying online through the IRS website.
Step 4: Colorado Sales Tax License
In Colorado, businesses that sell products or certain services will need to obtain a Colorado Sales Tax License from the Colorado Department of Revenue. This license, sometimes called a vendor’s permit or a resale certificate, allows a business to collect sales tax from customers and remit it to the state.
The requirement applies to most retail businesses, including those selling goods online to Colorado customers. Some service providers may also need this license, particularly those selling tangible personal property as part of their services.
To obtain a Colorado Sales Tax License, businesses must register with the Colorado Department of Revenue through their MyBizColorado online portal. The process involves providing information about your business, including its structure, location, and the types of goods or services you’ll be selling.
Step 5: Resale Certificate
Once you’ve secured your Colorado Sales Tax License, you may benefit from obtaining a Colorado Sales Tax Exemption Certificate, also known as a Resale Certificate. This document allows businesses to purchase inventory or materials intended for resale without paying sales tax at the time of purchase.
To use this certificate, you present it to your suppliers when buying goods you plan to resell. The supplier then doesn’t charge you sales tax, as you’ll be collecting it from the end consumer when you sell the product.
Step 6: City Business Licenses
While Colorado doesn’t require a general state-wide business license, many cities and counties have their own licensing requirements. These requirements vary based on location and the nature of your business. Here are some examples of local licensing requirements in major Colorado cities:
- Denver: The state capital requires various businesses operating within city limits to register. This includes auto parts recyclers, caterers, ice cream vendors, and many others. Businesses can obtain Denver licenses through the Denver Business Licensing Center.
- Colorado Springs: Certain businesses, such as concrete contractors, excavators, pawn brokers, and tree services, need to secure a business license from the City Clerk’s office.
- Aurora: All businesses operating within Aurora city limits must submit a Business License Application.
- Fort Collins: Every business within city limits needs a City Sales and Use Tax License. Some businesses, including bowling alleys, contractors, establishments serving liquor, and pawn brokers, require additional specific licenses.
- Lakewood: All businesses operating in Lakewood must register for a Sales and Use Tax License.
Since the requirements vary by location, check with your local city and county governments about specific licensing requirements for your business type and location.
Step 7: Occupational Licensing
In Colorado, numerous professions are regulated and require specific licensing or registration before practitioners can offer their services. These regulated professions span a wide range, including cosmetologists, massage therapists, plumbers, and many others. The Colorado Department of Regulatory Agencies (DORA) oversees the licensing requirements for most of these professions.
While DORA handles the majority of professional licensing, some industries fall under the jurisdiction of other state agencies. Examples include:
- Car Dealer & Remitter Licensing: Managed by the Colorado Department of Revenue, Auto Industry Division.
- Liquor Licenses: Overseen by the Colorado Department of Revenue, Liquor Enforcement Division.
- Food Handling: Regulated by the Colorado Department of Public Health and Environment.
These specialized industries have unique licensing processes and requirements set by their respective governing agencies. Business owners in these fields should contact the appropriate agency directly for the most up-to-date information on licensing procedures.
Step 8: Local Building & Zoning Permits
Before leasing or purchasing a property for your business, it’s important to understand if there are any building and zoning limitations.
Zoning: Before finalizing a location for your business, consult your local planning and zoning department to ensure compliance with local regulations. For instance, in Denver, the Community Planning and Development department offers an online zoning map and personalized consultations to help businesses understand zoning restrictions and opportunities.
Building Permits: If you plan to construct, alter, or repair a building for your business in Colorado, you’ll likely need a building permit to ensure compliance with the Colorado Building Code. Local building departments typically handle these permits. For example, in Aurora, the Building Division within the Public Works Department manages building permits and inspections.
Signage Permits: Installing business signage in Colorado usually requires a permit from your local government. Each municipality has its own regulations and permit requirements. In Colorado Springs, for instance, the Planning and Community Development Department oversees sign permits. In some special areas, like historic districts, there may be additional requirements to preserve the local character.
For only $99, you can save a lot of time and know your business complies with local, state, and federal requirements.
