How to Start a Business in Colorado in 11 Easy Steps

You love life in Colorado and are excited to bring your unique talents and ideas to the state’s thriving business community. You’re in good company: boasting over 715,000 small businesses — and over 1.1 million small business employees — Colorado is a haven for entrepreneurs who want it all.

Colorful Colorado has been named the ninth most business-friendly state and regularly scores high rankings for its workforce and infrastructure. A panel hosted by the Metro Denver Economic Development Corporation shared key perks that keep entrepreneurs returning to Colorado: “educated workforce, quality of life, and tax structure.”

There’s good reason to start a small business in Colorado, but this process can still feel daunting. We’re happy to help. Check out our easy-to-follow guide and discover the simple steps you can take to get your new venture ready for opening day:

1. Fine-tune your business idea
2. Create a business plan
3. Choose a business name
4. Choose a business structure
5. Set up Banking, Credit Cards, & Accounting
6. Get Funding for your Colorado business
7. Get Insured
8. Obtain Permits & Licenses
9. Find your team
10. Market & Grow Your Business
11. Open the doors!

Step #1. Fine-tune your business idea

Every new business venture begins with an idea. Your core concept might seem simple at the outset, but, with some nurturing, it can turn into something transformative. There’s no tried-and-tested secret to finding that genius idea, however. If you’re lucky, it’ll show up in a stroke of brilliance — but in all likelihood, you’ll need to put in a lot of thought and effort to find something that sparks your passion and is also realistic.

Match your idea to local interests and specialties

As you break into the business world, don’t force yourself to create a product or service that feels unnatural. Instead, evaluate the unique needs of your local market to gain fresh insights into what residents of the Centennial State want.

While universal business needs exist — restaurants, convenience stores, and clothing shops, for example — you’ll benefit more by exploring options unique to Colorado. Because residents love the outdoors, you can tap into opportunities ranging from ski and snowboarding gear to camping supplies and even fat‑tire bikes. If you’re focused on service‑based ideas, make sure you factor in Colorado’s distinctive geography and location so your offerings truly resonate.

Think carefully about the state’s major industries and do your research to figure out what is currently thriving. Top industries highlighted by Colorado’s Office of Economic Development & International Trade include aerospace, bioscience, financial services, electronics, and tourism.

Still struggling to find ideas that match Colorado’s appetite for action? Consider these options:

• Outdoor gear rental shop
• Bed and breakfast
• Short-term rental management
• Craft brewery
• Dispensary
• Drone services
• Sustainable construction
• Car detailing
• Pilates studio

Consider your strengths

No matter what local demand looks like, you need to have the skills and passion to actually bring your business idea to life. This is why playing to your strengths is so important. Begin with a self-assessment, revealing where you excel and where you may need some help.

Don’t just focus on skills; what are you genuinely interested in? By pursuing your passion, you can enter the market armed with a deep knowledge and understanding of your industry — plus, the desire to keep learning and growing.

Check viability

Some businesses live or die based on the demand for core products or services. Simply put, if there’s no demand, there’s no future for the business. Not feeling entirely confident that your idea has what it takes to thrive? Think carefully about local demand and consider whether your proposed business will fill any gaps in the market.

Demand should be a priority, but you’ll also want to be mindful of the competition. Will you need to face off against a well-established competitor with a loyal following? Stiff competition doesn’t automatically mean that your business is destined to fail, but it could certainly cause problems as you try to build a loyal customer base.

Step #2. Create a business plan

The expression “those who fail to plan, plan to fail” is certainly true in the business world. With so many factors involved in operating a successful business, it’s important to lay the groundwork early on with a comprehensive plan. It doesn’t need to be lengthy – in fact, it’s possible to cover all the essentials in just one page. Details worth adding include:

Market research

Market research introduces you to the customers and competitors that shape Colorado’s business community. This is your ticket to staying ahead of industry trends. Begin by seeking insights from surveys, focus groups, and interviews, asking locals for their honest opinions.

State and regional industry reports can also provide valuable information. Take a look at the Colorado Information Marketplace or the Colorado State Demography Office, where you’ll find population details that help you learn about your future customers and understand local market conditions.

The ultimate goal? To define a unique value proposition: something that distinguishes your business within Colorado’s competitive market. This proposition will ultimately help you clarify your branding and marketing strategies so you can communicate your strengths and build lasting connections with customers.

Financial plan

Clarify your financial situation to build confidence in the economic side of running a business. Create a detailed financial plan that sheds light on likely startup costs along with revenue streams. Include projections that show how you’ll turn a profit over time.

Financial forecasts can help you appeal to lenders, but accuracy is crucial. Check and double-check projected numbers, clearly documenting all assumptions and drawing attention to your break-even point: the exact moment when your revenue will fully cover your costs. This is a major landmark in any Colorado business — and it’s one that lenders should feel confident you’ll eventually reach.

Marketing plan

How will you clue potential customers or clients in on your Colorado business? Devise a marketing plan that gets people talking. Explore multiple marketing strategies: digital marketing to reach customers through email or social media, plus traditional marketing — flyers, posters, or even newspaper ads. Tailor your campaigns by identifying your target audience and adapting your tone accordingly.

Choose a location

A well-known expression describes one of the most important aspects of the business planning phase: location, location, location. It can be a make-or-break factor for many businesses — especially in the retail and dining sectors. This isn’t as simple as going to where the people are, for that strategy comes with its own set of challenges. A densely populated urban center may provide plenty of car and foot traffic, after all, but at the cost of higher building rent or land prices.

Keep in mind that zoning laws may vary from city to city and county to county. These concerns may be somewhat dependent on your industry or niche. For example: if you want to open a bar and cater to the live music crowd, you’ll need to be aware of any noise ordinances or city curfews on the books. These issues aren’t always top of mind when choosing a location, but they are important nonetheless.

Tailor your location to your products or services. Think about what drives demand in various cities or regions: the thriving tech environment in Denver, for example, or seasonal tourism in Aspen. Colorado Springs beckons with its lower cost of living and close-knit military population, but Boulder draws from a vibrant campus culture and a clear passion for eco-friendly living.

Decide if you’ll run an online-only business

There’s no need to worry about foot traffic if you run an online business, but you’ll likely encounter a whole other set of challenges:

• Setting up a website. If you don’t have a brick-and-mortar store, your website may be your main point of contact. In other words: your domain name is incredibly important. Search for one that is easy to remember and, more importantly, easy to market.
• Making an impression on social media. A robust social media footprint is a must for any online business looking to stay afloat. A presence on Facebook or Instagram will ensure that customers can keep up with key developments: opening events, product launches, and major sales.
• Figuring out third-party distribution. Many online retailers work with third-party distributors that handle the shipping of products as well as payment processing. Online storefronts such as Shopify grant your small business a bigger online presence.

Step #3. Choose a business name

You may have a genius idea for a business name, but is it actually available? Be sure to check with the Colorado Secretary of State before printing hats, shirts, or coffee mugs with your favorite name. By performing a Colorado business entity search, you should be able to see which names are available.

Don’t forget to search the state business database for the names of existing businesses that may look and sound similar. Consider whether a good domain name is available. Ideally, your business name and domain name will be an exact match.

Another essential? Adding “limited liability company” or the abbreviation “LLC” if you plan on using this particular business structure.

Register a DBA

Your official business name does not need to be identical to the name you use for everyday business operations. Doing Business As (commonly known as DBA) provides a workaround, but this needs to be registered. In Colorado, this is known as a trade name. Before filing, you should perform a Colorado trade name search through the Secretary of State’s website to make sure your desired name isn’t already in use. Once verified, you can register it by completing the Statement of Trade Name form online.

Step #4. Choose a business structure

Your business structure provides a legal framework, determining how your business will operate and how you’ll be taxed. Choose carefully, as this could have huge implications, determining your liability protection, your tax challenges, and even your funding opportunities. Options worth exploring include:

• Sole proprietorship. Owned and operated by a single person, the sole proprietorship is favored for its simplicity. Unfortunately, this doesn’t provide personal liability protection, as there is no formal separation between the business and you, the owner.
• General partnership. Similar to a sole proprietorship but featuring multiple owners, a general partnership allows you to launch a business in Colorado without registering. Again, this comes at the cost of liability protection.
• Limited liability company. Discover a middle ground between sole proprietorship (or general partnership) and corporation with a Colorado LLC, which gives you the best of both worlds: much-needed liability protection, but also, the ability to avoid double taxation and other corporate complications.
• Corporation. Corporations operate as legal entities directed by shareholders. Compared to other business structures, these promise greater growth potential — but with a few key caveats: increased complexity from regulatory requirements and formal governance structures. Corporations take two main forms: S corporations, which limit the number of shareholders, and C corporations, which allow unlimited growth but face double taxation.

Tax advantages for each business structure

While personal liability is often top of mind when choosing a business structure, taxation is also worth considering. Take a close look at these structure-specific perks and downsides:

• Sole proprietorship or general partnership. One of the core advantages of starting a sole proprietorship or general partnership — beyond the limited paperwork, of course — is that this avoids corporate taxation. Instead, business income is reported directly on corporate tax returns.
• Limited liability company. Achieve full taxation flexibility with LLC formation, which allows you to proceed as you see fit. The typical approach involves pass-through taxation: reporting your profits directly on your business return. If you prefer, however, you can elect to be taxed as a corporation.
• Corporation. S corporations and C corporations handle taxes differently. S corporations pass profits and losses directly to shareholders, making it possible to avoid double taxation. C corporations, however, pay taxes on profits at the corporate level — and shareholders also pay income taxes on dividends. This leads to double taxation.

Step #5. Set up banking, credit cards, and accounting

Take the headache out of bookkeeping by using business-focused bank accounts, credit cards, and accounting software. These tools help you track income and expenses while also keeping your personal and business finances separate.

Another perk? The right solutions save you time, so you can focus on growing your business instead of worrying about record-keeping. Common options for managing business finances include:

Business banking

Make the effort to keep your business finances separate from your personal accounts. Failing to do so could ‘pierce the corporate veil,’ exposing you to considerable legal and financial risks. The easiest solution? Using a dedicated business bank account. This protects you legally and also simplifies bookkeeping.

Business credit cards

Use a business credit card to further separate personal and business finances. This also helps you build a credit history for your business. Many cards also offer perks like points or cash-back rewards, but their main function is to establish and strengthen your business credit. This will make it easier to secure financing in the future.

Business accounting

The secret to maintaining a healthy cash flow? Working with a dedicated accountant or using trusted accounting software. An accountant can cut through the confusion with personalized advice, but accounting software may be more budget-friendly. Many small business owners use software for everyday financial tracking but look to accountants for specialized services come tax season.

Step #6. Get funding for your Colorado business

Every new business begins with its own unique set of funding challenges. Ideally, you’ll have plenty saved in your personal funds — but if you’re like many aspiring business owners, you’ll need to start from scratch. Thankfully, there are several ways to secure additional funds to support your entrepreneurial dreams.

If you struggle to get enough money through home equity loans or new lines of credit, a small business loan could be a solid alternative. The Colorado Office of Economic Development and International Trade has many different loan programs available to businesses in nearly every sector. For example, the Colorado Startup Loan Fund offers free business coaching plus loans totaling between $1,000 and $150,000.

Other loans are available through the Small Business Administration. This helpful federal agency is known for lending entrepreneurs a hand as they start and grow their businesses. A notable option: the SBA 7(a), which is available to many types of new businesses and can provide funds for real estate space and business equipment.

Another SBA option worth exploring? The microloan, which is designed to give small ventures a solid start. This program has been known to provide up to $50,000 for needed business expenses, although the average loan granted is about $13,000.

Colorado-specific funding options

Small business grants Colorado provide valuable support for businesses across many sectors. A notable program from the Colorado Department of Agriculture offers funds for small food retailers committed to expanding food access in low-income and low-access communities. The state’s Small Business Accelerated Growth Program also issues direct grants to businesses that complete an online training program dedicated to implementing sound financial practices.

Loans and grants can be helpful, but they aren’t the only options available. Look into venture capital funding and angel investors for additional capital to help scale your business. If you go this route, be mindful of the trade-offs: you may need to give up equity while also allowing investors to share in decision-making processes. Eventually, these investors will also want to see a return.

Another option worth considering? Crowdfunding, especially if your new business venture fills a vacant spot in a niche market. Several Colorado businesses have found success via crowdfunding, including outdoor clothing retailer ButtnSki and Westbound & Down Brewing.

Step #7. Get insured

Insurance might not be the most exciting aspect of launching a Colorado business, but it’s certainly important. This protects you from a range of economic and legal risks. Equipped with the right insurance policy, you can rest easy, knowing that, in the worst-case scenario, you’ll recover without incurring severe financial losses. Look into these options to protect your business:

• General liability insurance. Cover bodily injuries (specifically for non-employees) and property damage with general liability insurance. This provides broad protection and is especially important if you want to start a brick-and-mortar business in Colorado.
• Professional liability insurance. What happens if errors prompted by your business or its employees cause clients financial harm? If you’re backed by professional liability insurance, you can cover relevant legal fees or settlements.
• Property or auto insurance. Protect your Colorado business property against fire, theft, or natural disasters. Consider adding commercial auto insurance if you use company cars or other business vehicles.

Colorado state-specific insurance requirements

General liability and other insurance policies are recommended but not always required. Other types of insurance, however, are absolutely essential:

• Workers’ compensation. No matter how many employees work for your business, you need to obtain workers’ compensation insurance. This provides medical and lost wages benefits in the event that one of your employees is injured on the job. This can be purchased from an insurance agent, but the cost cannot be passed on to employees.
• Unemployment insurance. In Colorado, residents who lose their jobs through no fault of their own are eligible for unemployment insurance. This is funded through a state-based UI Trust Fund, which is supported by premiums from employers.

Step #8. Obtain permits & licenses

Good news: you don’t need to get a general Colorado business license to open your new venture in Colorado. That doesn’t mean you’re freed from the hassle of applying for various permits or licenses, however, as these may be required to provide specific services.
You may need, for example, a liquor license or an occupational license.

What’s more, many cities and counties have their own business license requirements. In Littleton, for example, businesses “engaged in commerce of any kind” need to complete the application for the Business & Sales/Use Tax License.

Do your research to find out which permits or licenses are required locally and also for your industry or niche. Colorado’s Department of Regulatory Agencies is a great place to start. To confirm local licensing requirements, check out the licensing division or office in your city or county.

Federal income tax and Colorado local tax

Every new business that hires employees will need an Employer Identification Number from the IRS. Employers also need to set up payroll taxes and provide the IRS with quarterly payroll returns via Form 941. This form reports federal income, Social Security, and Medicare taxes withheld from each employee’s paycheck.

Depending on how you run your business, you may need to pay certain local taxes. Colorado typically maintains an income tax rate of around 4.4 percent, although this is occasionally reduced to 4.25 percent. Some Colorado cities also collect occupational privilege taxes.

Colorado-specific regulations

While Colorado lacks a general business license, most local businesses ultimately need to deal with the Colorado Sales Tax License. In other states, this is known as a reseller’s license or a vendor’s license.

Currently, the state sales tax is 2.9 percent, although additional taxes may be imposed by various cities. For this reason, the combined sales tax can be a lot higher than the state sales tax.

Colorado Springs, for example, maintains a city sales tax of 3.07 percent, plus 1.23 percent for El Paso County and even 1 percent for the Pikes Peak Rural Transit Authority (PPRTA). The combined amount is 8.2 percent.

Step #9. Find your team

People are the backbone of your Colorado business, and thankfully, there’s no shortage of amazing people in Colorful Colorado. The talented workforce is frequently highlighted as a key perk of doing business in the Rocky Mountains: business leaders hosted by the Metro Denver Economic Development Corporation are in clear agreement: “talent [is] a defining strength for Colorado.”

As a business owner, you should have no trouble landing skilled employees. Even in a rich workforce, however, you need to be careful about who you hire and why. After all, not just anyone will support your vision while also providing the right skills and expertise to move your business forward.

Finding the right people is key; you want staff members or contractors with a solid track record and a positive attitude. Consider whether they fit the culture of your business and whether they share in your passion.

Comply with Colorado payroll regulations

You’ve found an amazing team and are excited to build a work culture that helps your new employees reach their full potential. Training may be top of mind, but don’t forget about payroll regulations. Essentials highlighted by Colorado’s Department of Labor and Employment include:

• Colorado Healthy Families and Workplaces Act
• Colorado Wage Act
• Colorado Overtime and Minimum Pay Standards
• Equal Pay for Equal Work Act

Colorado’s Division of Labor Standards and Statistics (DLSS) provides helpful information about employer requirements — including details about the minimum wage, which periodically increases and also varies between cities. To comply with local laws, be prepared to create regular pay periods — no longer than one month or thirty days — and post notices detailing not only paydays, but also, where and how employees can expect to be paid.

Consider working with contractors

Independent contractors can help you tackle specific tasks on an as-needed basis. This helps you save money on employee-related expenses and also brings extra flexibility to your business.

There are definitely risks involved, however, and if you’re not careful, you could accidentally misclassify your contractors. Be sure to distinguish them from traditional employees. This means granting contractors greater control over their work — and using clear contracts to clarify expectations.

Step #10. Market & grow your business

Using your previously developed marketing plan as guidance, create campaigns that help your brand stand out. There’s no one-size-fits-all approach to marketing; this is heavily dependent on your niche and your audience. Still, certain tried-and-tested strategies tend to make a splash:

Attract customers with special offers

Get locals talking with special deals that convince them to give your products or services a try. Enticing options include:

• Free samples
• Free shipping
• Social media giveaways
• Buy one, get one (BOGO) sales

Collaborate with local businesses

Make the most of the thriving Colorado business community and build connections with other entrepreneurs. While it’s best to steer clear of the competition, plenty of aligned businesses can send customers your way — and vice versa. Drum up business with bundled or packaged deals: if you run an outdoor equipment rental shop, for example, you could partner with a local tour guide or a hotel to offer adventure packages.

Invest in word of mouth

Happy customers attract more happy customers, so don’t underestimate the profound power of word of mouth. This method draws on a simple, but meaningful reality: people take stock in what their friends and family members have to say, and, all things being equal, are more likely to visit establishments recommended by loved ones.

There’s no shortcut to scoring word of mouth. It takes stellar service and high-quality products to make an impression so significant, it gets people talking. This is well worth the effort, however, as the customers gained through word of mouth may be some of the most enthusiastic, and eventually, the most loyal.

Pay attention to online reviews

The online review serves as the modern update to the in-person recommendations of yesteryear. People still look to loved ones for advice, but they also want to know what the public thinks of a particular business or service. Online reviews make this possible, with sites such as Yelp, TripAdvisor, and Google compiling reviews from pleased (or not-so-pleased) customers. You can’t guarantee a solid review, but you can encourage customers to share their thoughts.

Showcase your Colorado business with unique, helpful content

The right content strategy will showcase your expertise, helping potential customers or clients feel confident about your ability to meet their needs. Don’t focus exclusively on “sale-sy” content; you want customers to believe that you genuinely have their best interests at heart — and you can show this with suggestions or advice that make their lives better.

Invite customers to opt into your mailing list

Opt-in marketing helps you build a community of enthusiastic customers or clients who are genuinely interested in what you have to offer. This is a great way to build trust while also keeping your business top of mind. Once customers are on your list, you can send occasional updates about new products or upcoming events.

Step #11. Open the door!

You’ve put in the work, and now, it’s time to celebrate all you’ve accomplished as a Colorado business owner. Get the ball rolling with early events or promotions — but continue to put in the effort with marketing and ongoing customer outreach.

Plan a successful launch event

Make a strong first impression with a launch event that introduces your Colorado business to the local community. This event will not only let people know that you’re open for business, but it will also give them a chance to see what you’re all about. Special grand opening sales or promotions, if heavily marketed through social media, word of mouth and other avenues, could attract customers eager to return in the future.

Land your first sale

Your launch event should get your name out in the community, but that’s only the beginning. Ideally, this will also help you land your first few sales. Don’t be discouraged if it takes a bit longer to land that first sale than you anticipated, as every new business takes time to find its foothold in the local community.

Conclusion

Starting a new business in Colorado can be an incredibly rewarding experience, especially if you know what it takes to navigate the pre-opening process. Topics such as taxes, insurance, licenses, and permits may seem intimidating at first — but armed with the information in this guide, you can navigate the rocky path towards success. Discover a bright future as a Colorado business owner and get ready to make your entrepreneurial dreams come true!

FAQ