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How To Start A Business In Colorado

How To Start A Business In Colorado

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How To Start A Business In Colorado

How To Start A Business In Colorado

Ready to start a business in Colorado but not sure where to start? Don’t worry, our step-by-step guide breaks down the process into easy steps – from choosing how to structure your business to understanding permits and licenses.

Steps For Starting A Business In Colorado

Step 1: Choose a Business Idea

The starting point for your Colorado business journey is deciding on your business concept. Whether you have a clear idea or are still exploring options, our library, with hundreds of business ideas, is here to help. This will give you information on different industries, how much it might cost to start, and helpful tips to get you going.

Step 2: Write a Business Plan

Once you have the idea nailed down, writing a business plan should be the next step in the startup process. A business plan is essentially a framework that lays out your vision in detail and guides you through the process of starting and growing your business. It’s also very helpful for calculating how much it will cost to get your business off the ground and test the feasibility of the idea.

Related: How to write a business plan

Step 3: Find the Money

After running the numbers in the business plan, you should have an accurate estimate of what it is going to cost to launch. This brings us to the next phase of starting a business, which is finding the money needed to get off the ground.

Each option has its advantages and disadvantages, but here are the most common sources of funding.

  • Personal funds: Many entrepreneurs use their savings and credit cards or take out a home equity loan to fund their new business. This is the most simple route, but be sure to keep some money set aside in case things don’t go as planned.
  • Conventional bank loans: Banks and credit unions offer small business loans to qualifying borrowers. These loans typically have lower interest rates than other financing options, but they often require a personal investment, strong credit history, collateral, and a detailed business plan.
  • SBA loan guarantees: The U.S. Small Business Administration (SBA) offers loan guarantee programs to help small businesses obtain financing from participating lenders. These programs reduce the lender’s risk by guaranteeing a portion of the loan, making it easier for small businesses to secure funding. The most popular SBA loan program is the 7(a) Loan Program, which can be used for various purposes, including working capital, equipment, and real estate.
  • Microloan programs: Microloan programs are designed for small businesses that need smaller amounts of capital. In Colorado, several organizations offer microloan programs, such as the Colorado Enterprise Fund, NeighborWorks Southern Colorado, and DreamSpring. These organizations provide loans with more flexible requirements than traditional bank loans.
  • Investors: There are various types of investors who might be interested in funding your business, including angel investors, venture capitalists, and crowdfunding platforms. Angel investors are typically high-net-worth individuals who invest their personal funds in early-stage businesses in exchange for equity or debt. Venture capitalists are firms that invest in high-growth potential start-ups, often providing funding in exchange for significant equity stakes and decision-making power. A few Angel groups in Colorado include the Denver Angel Investors, Colorado Angel Network, and SoCo Angels.

Related: Understanding the different types of business funding

Step 4: Select a Business Structure

The next step in starting a business in Colorado is selecting a business structure (also called a business entity), which refers to how a business is legally organized. It is important to decide on a business structure early on, as this decision will have an impact on the other steps that we will cover further on in this guide. There are four primary business entities: sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). A brief description of each is below.

sole proprietorship is a type of business owned and operated by an individual who is responsible for all aspects of the business, including profits, losses, debts, and liabilities. In Colorado, there are no formal registration requirements for establishing a sole proprietorship. The business owner can operate under their own name or choose a trade name (also known as a “doing business as” or DBA name) and register the trade name with the Colorado Secretary of State.

While a sole proprietorship is easy to set up and has minimal regulatory requirements, the owner has unlimited personal liability for the business’s debts and obligations. This means that the owner’s personal assets, such as their home or car, could be at risk if the business encounters financial difficulties or faces legal claims.

Despite the liability concerns, sole proprietorships can be an attractive option for small or low-risk businesses due to their simplicity, low setup costs, and the owner’s complete control over the business.

Related: How to form a sole proprietorship in Colorado

general partnership is a business structure in Colorado where two or more individuals (partners) agree to operate a business together and share its profits, losses, and management responsibilities. Each of the general partners contributes to the business in terms of capital, labor, or skills and is personally liable for the partnership’s debts and obligations.

In Colorado, a general partnership can be formed without filing any formal documents with the state. However, it is highly recommended to create a written partnership agreement outlining the terms and conditions of the partnership, such as profit and loss distribution, management roles, and procedures for adding or removing partners.

Related: What is a partnership?

corporation is a more formal and complex business structure than a sole proprietorship and partnership, as it is characterized by its separate legal existence from its owners, who are called shareholders. This type of business structure provides limited liability protection to its shareholders, meaning that their personal assets are generally not at risk for the corporation’s debts and obligations.

In Colorado, to form a corporation, you must file Articles of Incorporation with the Colorado Secretary of State and pay the applicable filing fees. In addition to higher costs, another downside is that corporations have more rules to follow compared to sole proprietorships or general partnerships.

Related: How to form a Colorado corporation

The Limited Liability Company (LLC) is a popular business structure in Colorado that combines the benefits of a corporation’s limited liability protection with the flexibility and pass-through taxation of a partnership or sole proprietorship.

To create an LLC, the Articles of Organization must be filed with the Secretary of State.

Related: How to form a Colorado LLC

Forming a corporation or LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.


Some popular formation services include:


IncFile - Great service and free registered agent the first year.

Northwest - Privacy-Focused: Free registered agent and private business address for 1 year!

ZenBusiness - Easy to use and free registered agent for 1 year!

Step 5: Register the Business

Registering a business in Colorado involves several steps, depending on the type of business structure you choose. The specific business licenses and permits required in Colorado vary depending on the nature of your business, its location, and the regulations of local and state agencies, but here are some common licenses that are needed:

  • Business license: There is no general state of Colorado business license, however, many cities require a general business license in order to operate.
  • Employer Identification Number: An EIN, also known as a Federal Employer Identification Number (FEIN) or Federal Tax Identification Number, is a unique nine-digit number assigned by the Internal Revenue Service (IRS). The EIN is used for tax reporting purposes, identifying the business as a tax-paying entity.
  • Sales tax license: Businesses selling products and certain services will need to register for a sales tax permit with the Colorado Department of Revenue.
  • Professional licensing: Some services, such as cosmetologists, massage therapists, and plumbers, require licensing in Colorado.
  • Zoning permits: Some physical locations will need to obtain zoning permits from the city or county before they can open the business.

Related: What business licenses and permits are needed in Colorado

Step 6: Open a Business Bank Account

After setting up your business structure and registering your business in Colorado, you will have the documentation to open a business bank account. This account keeps your business transactions apart from your personal finances, making it easier to keep tabs on day-to-day expenses, prepare for tax season, and see the financial health of your business. While most banks provide business checking options, it’s important to compare the features and fees to find the best fit for your business needs.

Step 7: Hire Employees

If hiring employees is a part of your business plan, the next step is to begin preparing to get set up as a new employer. It’s important to take the time to understand your responsibilities as an employer, such as understanding the legal requirements, registering with the Colorado Department of Revenue and Colorado Department of Labor and Employment, obtaining workers’ compensation insurance, and preparing payroll and withholding taxes.

Related: Steps to hiring your first employee in Colorado

Step 8: Obtain Business Insurance

The next step, while not needed by every business, is one that should not be overlooked. All businesses face risks, and business insurance can provide financial protection and peace of mind in the event of unforeseen circumstances, such as property damage, liability claims, or employee injuries. While every type of risk can’t be covered, when establishing your business, consider the following types of insurance:

  • General liability insurance: This type of coverage is important for many small businesses as it protects against someone getting hurt on your property or if you damage someone’s property.
  • Property insurance: Whether you own or lease your business space, property insurance can protect your physical assets, such as buildings, equipment, furniture, and inventory, in case of damage due to events like fire, theft, or natural disasters.
  • Workers’ compensation insurance: If you have employees, workers’ compensation insurance is typically required by Colorado law. This coverage provides benefits to employees who suffer work-related injuries or illnesses, including medical expenses and lost wages.
  • Professional liability insurance: Also known as errors and omissions (E&O) insurance, this coverage is particularly important for businesses that provide professional services or advice, such as consultants, accountants, or architects. Professional liability insurance can protect your business from claims arising from negligence, errors, or omissions.
  • Commercial auto insurance: If your business owns or uses vehicles for work purposes, commercial auto insurance is necessary to protect against liabilities and damages resulting from auto accidents.

Related: Types of insurance your business may need

Step 9: Set up a Bookkeeping System

Another important step in starting a business is setting up a system to track the income and expenses of the business. Staying on top of finances not only helps a business comply with tax and regulatory obligations, but it can be used to track and monitor trends in the business to maximize profits.

Related: Setting up accounting for a business

This material is property of StartingYourBusiness.com

Common Questions When Starting A Business In Colorado

Is Colorado a good place to start a business?

Colorado is a great place to start a business for several reasons, including its strong economy, educated workforce, and supportive entrepreneurial ecosystem. Here are some key factors that make Colorado a desirable location for business startups.

Strong economy: Colorado has consistently ranked as one of the top states for economic growth in the United States.

Educated workforce: Colorado boasts a highly educated workforce, which is important for businesses seeking skilled employees.

Supportive entrepreneurial ecosystem: Colorado offers a thriving environment for startups, with access to resources, networking opportunities, and mentorship.

Quality of life: Colorado is well-known for its excellent quality of life, with numerous outdoor recreational opportunities and a strong focus on work-life balance. A high quality of life can be an asset for businesses trying to attract and retain top talent.

Tax incentives: Colorado offers several tax incentives for businesses, including the Enterprise Zone Program, which provides tax credits to businesses that invest in economically distressed areas.

What are the steps to starting an LLC in Colorado?

There are three main steps to starting an LLC in Colorado. These include:

1.      Making sure the LLC name is available
2.      Appointing a Colorado Registered Agent
3.      Filing the Articles of Organization

To learn more about setting up an LLC, check out our guide to starting an LLC in Colorado.

How much does it cost to start an LLC in Colorado?

The cost to file the Articles of Organization with the Colorado Secretary of State, which is the paperwork to start an LLC in Colorado, is $1.

What licenses do I need to start a business in Colorado?

Yes, a sole proprietor in Colorado may need a business license, depending on the type of business they are running and where it’s located. The requirements for business licenses vary based on the local city or county regulations and the specific industry of the business.

Colorado Small Business Resources

There are 684,726 small businesses in Colorado, which is 99.5% of all businesses in the state,1 and 1.2 million people are employed by these small businesses.2 Because of the economic impact of small businesses, there are a number of small business resources to help Colorado businesses start and grow. Some of these include:

  • Colorado Office of Economic Development and International Trade: OEDIT supports entrepreneurs and small businesses across the state by investing in a number of economic development programs.
  • Colorado Small Business Development Center Network: The CSBDC supports the growth and success of both new and existing businesses in Colorado by offering guidance and training programs.
  • Colorado Small Business Navigator: This resource provides information on federal, state, and local licensing requirements for businesses in Colorado.
  • Minority Business Office: Part of OEDIT, MBO aids minority, women, and veteran entrepreneurs throughout the state with various support services.
  • MyBizColorado: A comprehensive platform that enables new businesses to register with the Colorado Secretary of State and sign up for licenses, sales tax, wage withholding, and unemployment insurance accounts.
  • SCORE Denver: Offers counseling and mentoring services to small business owners and entrepreneurs, helping them navigate the challenges of business ownership.
  • Venture Validators: An initiative by Colorado State University’s Institute for Entrepreneurship, this free program allows aspiring entrepreneurs to validate their business concepts through bi-weekly meetings over a two-week period.

Sources

  1. Small Business Administration ↩︎
  2. Census Bureau ↩︎

How To Start A Business In Colorado

How To Start A Business In Colorado

Greg Bouhl

Greg Bouhl

Welcome! My name is Greg Bouhl, and I am a serial entrepreneur, educator, business advisor, and investor.

StartingYourBusiness.com is here because of the many clients I worked with who made decisions based on inaccurate and outdated information.

Starting a business is hard, but here you will find the practical tools, resources, and insider tips to help you successfully start a business.

If there is a question about starting a business or help finding a resource, I'm here to help!

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