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How to start a business in Colorado in 8 steps

Residents of Colorado have a rich history of wealth building, dating back to the early mining days that accompanied the state’s formation. It should be no surprise then that a pioneering spirit continues to live on amongst Coloradans today, particularly when starting their own small businesses.

While each startup is different, the process for starting your own small business in Colorado is relatively the same, no matter what sector you’re attempting to break into. Here we explore the ins and outs of starting a small business in the Centennial State so that you can embark upon your new wealth-building journey with ease.

1) Think about the type of business you want to start

When it comes to starting your own business, the key to success is to ask yourself one question: If you could have any job where money, time, location, and resources were no object, what would you do? Taking the time to reflect and answer this question honestly will be instrumental to your business’s success because you’re eliminating many ideas that will not bring you true happiness.

By aligning your happiness and passion with the type of business you want to start, you’re getting a leg up on the competition. Your energy and drive to succeed will come from a genuine place, providing lasting ammunition for long days and nights while also minimizing your risk of burnout.

With your chosen new business idea in mind, the next step to actualizing your business will be figuring out a business plan for how you’ll make your money, and to that end, what kind of business or legal structure you’ll need to establish.

A company’s legal structure—also known as a business structure—designates how your new business will be classified and organized in the eyes of the law. In Colorado specifically, there are four main ways in which you can set up your legal structure:

  • Sole Proprietor: If you’re an individual and you’re looking to save money, choosing to be a sole proprietor might be the best option for you. Sole proprietors are exempt from paying Colorado’s startup filing fee, which is great if you’re on a budget. However, sole proprietorships leave you exposed from a liability perspective since any debt or lawsuit against your company could put your personal assets at risk.
  • General Partnership: For business entities consisting of two or more people, a general partnership is an easy, low-cost option to establish. Like sole proprietorships in Colorado, there is no state fee to set up a general partnership. Also like sole proprietorships, general partnerships are passed through business entities, whereby the profits or losses are passed through to both partners’ Social Security Numbers—with both partners’ personal assets at risk—should any legal problems for the partnership develop.
  • Corporation: For increased legal protections, a bit more paperwork, and the ability to run a separate business entity that will not expose your personal assets in case of a lawsuit, a corporation might be the best fit for you. You have your choice of electing to file your Articles of Incorporation as a C corporation or S corporation, which are two different ways in which the business is taxed. In the state of Colorado, the cost of forming a corporation is a $50 filing fee—which is more expensive than a general partnership—but offers far greater value, whether you’re running the business by yourself or with someone else.
  • Limited Liability Company (LLC): Still unsure about which legal structure to choose? If you’re torn between a sole proprietorship and a corporation, a Limited Liability Company (or LLC) can provide you with the best of both worlds. With an LLC, you can operate as a sole proprietor but with the legal protections of a corporation. Like a corporation, the cost of forming an LLC in Colorado is a filing fee of $50.

When setting up your company’s legal structure, it’s important to consult a CPA or other income tax professional to ensure you’re complying with the latest, ever-changing tax laws, both with the Internal Revenue Service and with the state of Colorado. The last thing you’ll want to find out is that somewhere in the process of setting up your business, you missed a step, forgot to fill out a specific form, or submitted improper documentation.

3) Name and register your business

Once you’ve decided upon your business’s legal structure, the next step in actualizing your dream venture is to name and register your business entity with the state of Colorado. The process differs slightly depending on how your business is set up. Still, typically it involves choosing your business name, trademarking it, and acquiring a Federal Employer Identification Number or tax ID.

When choosing your business name, first recall how you set up the company’s structure. Suppose you’re set up as a sole proprietorship or a general partnership and conduct business under your full name(s). In that case, you’ll have an exemption from filing anything with the state of Colorado. However, if you plan to operate your proprietorship or partnership using a fictitious name or trade name—also known as a DBA or “Doing Business As”—you will need to register a Statement of Trade with the Colorado Secretary of State for a $20 filing fee.

For C corporations, S corporations, LLCs, and LLCs, you’ll need to register your company name at the time of formation and pay the $20 filing fee to the Colorado Secretary of State. However, doing so will not afford you any protection from anyone else using the name, so you’ll want to trademark the name of your business entity with The U.S. Trademark and Patent Office to cover your bases on the legal side.

With your business name chosen, the last step in the business registration process is to register for a Federal Employer Identification Number, which you can easily acquire by filling out an online form on the IRS website. Unless you’re registering your business as a single-member LLC or as a sole proprietorship, you’ll need to submit for a Federal Employer Identification Number. The exception to this is if your single-member LLC or sole proprietorship contains paid employees, in which case, you’ll also need to submit for a Federal Employer Identification Number in this scenario.

4) Apply for business licenses and permits

Depending on where your company will be located in Colorado and the specific nature of the business you’ll be running, there are business licenses and permits you’ll need to secure to start your operation. These range from business and professional licenses to tax licenses and are specific to your particular industry and business needs. Thus, it’s important to be aware of the licensing requirements for your specific sector.

Overall, there is no general business license that Colorado business owners must acquire, though several cities in Colorado—like Denver—may require business licenses as a prerequisite to opening. Professional licenses are required in Colorado for running skills and trade-based companies, such as plumbing and massage therapy. If your business is selling a product, you’ll need to head to the Colorado Department of Revenue and register for a Sales Tax Permit. To ensure your new business complies with all of the different business license and permit requirements, consult the Colorado Business Navigator or the U.S. Small Business Administration, which will provide Colorado-specific guidance—as well as federal insight—into the proper paperwork you’ll need to fill out.

5) Choose a location

When setting up a new business in Colorado, it’s important to know the statewide zoning restrictions and the zoning restrictions specific to the city where you intended to set up shop. Certain locations throughout Colorado will require you to obtain a zoning permit before you can officially get started, so doing your research and having a solid understanding of your targeted area is a must.

The next step after selecting your target area is to research the available spaces and see what fits your budget. You may find that your initial area of choice is too expensive for what you can afford. If that’s the case, you’re back to the drawing board, and it’s why many new business owners first start by pricing up different areas of town before deciding on their desired location.

Lastly, think through whether you do indeed need a physical establishment. With remote work and remote teams increasing almost daily, the need for office space is becoming less and less. Unless your business sells physical goods like food or provides in-person services, you may not even need a physical location to get up and running.

6) Open a bank account and prepare for future taxes

One way to keep your new business’ financials organized is to keep your business and personal expenses completely separate. A great way to do this—which will minimize your headaches come tax season—is to open separate business accounts and business credit cards for your business and to retain your other personal accounts for your personal use.

Unlike opening a personal bank account, opening a business bank account requires a bit more paperwork. Depending upon the financial institution you’re looking to bank with, you’ll typically be asked to provide some combination of your business’ Federal Employer Identification Number, Articles of Organization, Articles of Incorporation, and/or your personal driver’s license.

Another great way to stay organized between your personal and business expenses is to implement an expense tracking system, such as QuickBooks. In today’s digital age, you can scan and upload receipts into your backend accounting system with just a few taps on your mobile device, so managing your finances and organizing your tax paperwork has never been easier.

7) Purchase business insurance

One of the most overlooked components of starting a business in Colorado is obtaining business insurance. Yes, it’s true; outside of workers’ compensation insurance, most business insurance is optional, including liability insurance. However, just as you would want to protect your home or apartment with home or renters insurance or your automobile with car insurance, business insurance helps mitigate your out-of-pocket expenses in the event of theft, fire, lawsuit, or some other unforeseen situation in which your business assets could be compromised.

8) Create a marketing plan, hire employees, and more

With a solid idea of your business, understanding how it will make money, and an awareness of the different types of legal and financial paperwork involved to launch, it’s time to think about marketing, hiring, and your future business growth.

Since you’re a new business, chances are you’ll need to spend time procuring your first clients and publicizing your services to your target audience. Fortunately, there are various digital and social media products readily available for free that make this process easier than ever before. The key is to start small, create a system, and leave room for iteration and ideation. Treat growing your new business like a cool experiment, and you’ll be surprised how innovative you become when you’re having fun.

Congratulations! You’ve just learned the basics of how to start your own small business in the state of Colorado. As you continue to put the infrastructure of your new endeavor together, check out Huckleberry as a one-stop shop and business resource for all of your small business insurance needs. In just minutes, you’ll have a quote, giving you more time to focus on the growth of your new venture.


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