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Colorado has consistently been rated as one of the best places in America to start a business thanks to a combination of a strong economy, low unemployment and taxes, and a highly educated population. In fact, a 2020 study ranked two Colorado cities (Boulder and Denver) as two of the best 15 cities to start a business nationwide. Regardless of where you decide to settle in the state, there are plenty of opportunities to help your business thrive.

You can’t start a business without struggle, even in a bustling state like Colorado. There are several legal and financial requirements to work through. Also, setting up your company incorrectly can cause regulation or tax issues later, which could cost you financially or make you pause business operations. If you can launch your operation the right way, Colorado is a fantastic place for it.

Below, you’ll learn how to start a business in Colorado step by step.

Benefits of Opening a Business in Colorado

Colorado has favorable business tax laws, government friendliness to new industries, and diverse geography. Both startups that seek venture capital money, as well as small one-person businesses, have thrived here over the last decade. It’s also the best place for green businesses for these same reasons. 

Colorado is a business-friendly state to get started in, too. For example, it’s ranked as one of the best states for income taxes for businesses. Additionally, the state doesn’t have statewide business licensing requirements like many others, which makes it more affordable and less time-consuming to get started.

How to Start a Business in Colorado Checklist

Starting a business in Colorado isn’t too difficult if you know how to go about it. While each city you operate in may have slightly different requirements, you’ll be ready to do business throughout the state if you can follow the six main steps that we’ve outlined below. You can find more state-specific business resources to this process on the Colorado Secretary of State website. Checklist for How to Open a Business in Colorado 

1. Create a Business Plan for Your Colorado Company

The first step in launching any business successfully, whether in Colorado or elsewhere, is to create a detailed business plan. Every business starts with an idea on how to serve a certain group of potential customers, but it’s important to dive deeper and turn your idea into a plan so you’re ready for any of the other necessary steps to get your business off on the right foot. 

Regardless of your industry, including the following in your business plan: 

  • Details of your full idea and what problem you’re solving
  • Objectives that include SMART goals
  • Potential problems you’re aware of and how you’ll mitigate each
  • Who your target customer is
  • Financials and projections for the first 3 years, minimum

The Southern Colorado Small Business Development Center has put together business planning resources to help you get ready for the launch of your business. 

2. LLC vs Sole Proprietorship: Choose a Business Structure/Type

When you’re starting a business in the state of Colorado, you can choose from different business structures. The two most common options are sole proprietorship and limited liability company (LLC).

A sole prop is the quickest way to get your business started. You won’t have to file paperwork with the state, and you can start selling your goods or services today. However, you won’t get certain tax advantages of other business structures, such as avoiding the self-employment tax. In addition, should the business fail, creditors will have access to your assets as a sole proprietor is personally and wholly liable for any debts?

The most popular business entity for small companies in Colorado is instead choosing an LLC. This provides personal liability protection, as an LLC is an entirely separate entity. With an LLC, your personal assets are safe regardless of how successful the business becomes. You can also hire employees with an LLC in Colorado, and you may qualify for tax advantages that let you avoid double taxation on income.

Getting started with an LLC does take longer than just starting as a sole proprietorship. But if you have the right partner, like ZenBusiness, the process can be quick and easy. If anything goes wrong, it’s better to have the right protection in place to take care of any potential issues.

3. Determine Your Business Costs

One of the most important parts of creating your business plan is to build out what your financials could look like as a new business. This means you’ll need to be very specific on what your business costs are and accurately calculate them so that you can prepare financially for the first several months. When calculating your business costs, keep in mind that there are one-time costs as well as ongoing costs. 

One-time costs are things like a downpayment on an office building or the purchase of equipment that typically lasts many years. You only have to come up with the financing for these items when, or before, you launch your business. This is different from ongoing costs like rent, marketing materials, or taxes that you’ll continue to pay regularly, often monthly or quarterly.

Plan to cover one-time costs and ongoing costs to operate your small business for 6–12 months without any revenue. That way it can survive the unexpected, and you’ll have the time it takes to build a customer base. 

4: Create a Colorado Business Name

The next step in your journey is to create a business name that works for you throughout Colorado. Choose a name no one else in the state is using to transact business and one you can easily own the brand identity for, both online and off. Settle on one that’s easy to understand so you can own both a strong domain and various social media profiles.

You can use Colorado’s online tool to check if the name you want is available. Then you’ll pay $25 to reserve it. When that’s done, you can use the domain name search tool at ZenBusiness to help save your domain name. 

Transacting business in a name that’s already well established in your industry within the state could have legal repercussions. If your company’s name isn’t unique, consider registering a trade name, or DBA, that you’ll use in interactions with your customers.

5. Register Your Colorado Business and Open Financial Accounts

After reserving your business name with the state of Colorado, it’s time to register the business structure you chose, such as the LLC we discussed. You’ll need to first apply for a federal employer identification number (EIN) from the IRS, create your articles of organization, draft an operating agreement if you have other owners, and file paperwork with the right state authority. Luckily, ZenBusiness’s registered agents can take away the worry and time needed to complete this work. 

Once your Colorado paperwork is done, you’ll be able to set up a business bank account, get any permits or licenses you need, and get the necessary insurance. You’ll need a business bank account to keep your business and personal finances separate. Luckily, in Colorado, you won’t need a state-issued business license, but check with the cities where you’ll do business to see if they require permits.

General liability insurance is the main coverage most small businesses use. It shields your business from most lawsuits due to accidents or poor performance on your part. For example, if a customer slips and falls in your restaurant, general liability coverage can help mitigate the financial loss.

6. Market Your Business in Colorado

Now that you’re legally ready to start transacting business in Colorado, it’s important to figure out how to market it to reach your target customers. Coloradans are online just like residents of other states, including in smaller towns away from the bigger cities of Denver, Boulder, Colorado Springs, or Fort Collins. However, word of mouth and referrals are often the best marketing options in small populations. 

Depending on your industry, print and online ads have plenty of marketing opportunities. Keep company pages on social media platforms where your customers hang out most, whether that’s Facebook, Instagram, LinkedIn, or any other. If you have a physical location, make sure your Google My Business is up to date and optimized to show up at the top of business listings in your area. 

Put yourself in your customer’s shoes, and you’ll be much more successful than with blind paid advertising. Check out the Colorado SBDC’s marketing resources to learn more.

Examples of Good Businesses to Start in Colorado

Colorado has a good mix of populated places with large and growing cities, well-traveled suburban areas, and small towns. This makes it a nice fit for most types of businesses, including tech companies, restaurants, and rural-focused enterprises. Here’s a list of the types of businesses that can work well throughout the state: 

  • Environmental or energy-focused businesses
  • Restaurants
  • Tour guide
  • Rafting tours or equipment sales
  • Photography
  • Party planner
  • Ski equipment sales or rentals
  • Travel-related business
  • Business-to-business (B2B) services
  • Pet products

Read our guide on the Best Businesses to Start in Colorado.

Bottom Line

Overall, Colorado is one of the best states in the country to start a business because of its natural geography, business-friendly government, and strong economic climate. Starting your business is manageable in Colorado if you take the right steps to plan ahead and set your company correctly. 

Colorado How to Start a Business FAQs

  1. What is a good city to start a business in Colorado?

    The entire state of Colorado can be beneficial to start a small business, and the right city for you depends on your industry. Denver, Boulder, and Colorado Springs are consistently ranked in the top cities to start a business nationwide.

  2. How much does it cost to open an LLC in Colorado?

    The cost to open an LLC in Colorado starts with the $50 filing fee for your articles of organization, but you’ll also have to pay $25 more to reserve your business name. On top of Colorado’s fees, ZenBusiness can register your business for as little as $49 plus the state costs mentioned above.

  3. Do major corporations have headquarters in Colorado?

    Over 170 corporations base their operations in Colorado.

  4. What business and tax regulations are compulsory for an LLC business in Colorado?

    Colorado is a legal and tax-friendly state for small business owners. You can check out the Colorado Secretary of State website for resources on taxes and other business matters.

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