How to Start a Business in Colorado: A Comprehensive Guide

If you’re looking to start a small business in Colorado, you’ve come to the right place.

This is a comprehensive guide that will walk you through the process step-by-step, from forming and vetting your business idea to hiring employees and creating your online presence. 

More precisely, you’ll learn all about:

  • Developing your winning business idea,
  • Evaluating the business potential of your idea,
  • Naming your business,
  • Acquiring business licenses,
  • Registering your business,
  • Obtaining your tax IDs and filing taxes,
  • Choosing your business location,
  • Writing a business plan,
  • Securing funding,
  • Opening bank accounts,
  • Getting insurance,
  • Hiring employees,
  • Choosing your business software, and
  • Creating an online presence.

At the end of the guide, you’ll also find answers to some of the most frequently asked questions about starting a business in Colorado. 

Since this is a general guide on how to start a business in Colorado, we’ve provided resources for further reading and research at the end of the text in case you decide to delve deeper and explore the nuances of opening a specific type of business in Colorado.

How to start a business in Colorado cover

Is Colorado a good state to start a business? Key takeaways

According to the Colorado Office of Economic Development and International Trade’s (COEDIT) 2023 small business week report, there are over 653,000 small businesses in Colorado. These small businesses account for 99.5% of all businesses in the state and employ over 1.1 million people. 

As per the COEDIT’s list of major employers in Colorado, the state is also home to 9 Fortune 500 companies and has been ranked 2nd on Forbes’s list of the best states to start a business in 2023.

One of the reasons behind these numbers is its relatively favorable tax climate. Namely, the 2023 State Business Tax Climate Index places Colorado as the 21st most tax-friendly state in the US. The table below shows the exact numbers and rankings for Colorado.

Colorado’s tax score and USA ranking
Overall ranking5.1721st
Corporate taxes6.007th
Individual taxes5.8914th
Sales taxes4.2240th
Property taxes4.5136th
Unemployment insurance taxes4.4542nd
Source: taxfoundation.org

For comparison, the most tax-friendly state in the US is Wyoming, with an overall tax score of 7.76. So, Colorado isn’t too far off. 

💡 Plaky Pro Tip

If you’re interested in learning the tax scores for other US states starting with the letter C and seeing how small-business-friendly they are compared to Colorado, you can find more of our starting-a-business guides in the links below. Alternatively, you can check out the entire list of guides on our starting-a-business guide webpage:

While Colorado is among the states with more favorable state taxes, it’s worth mentioning that certain cities have their own taxation laws you’ll have to pay attention to when opening your business.

Despite this, businesses and industries in Colorado are thriving. Some of the most successful and concentrated industries in Colorado include:

  • Aerospace,
  • Bioscience,
  • Creative industries,
  • Food and agriculture, 
  • Health and wellness, and many others.

According to COEDIT’s webpage dedicated to Colorado industries, in 2020, Colorado was also declared: 

  • The number 1 state in private aerospace employment concentration, 
  • Number 4 for the concentration of STEM workers, 
  • Number 6 for the concentration of creative class occupations, and 
  • Number 2 state for technology and science.

With this in mind, it should come as no surprise that Colorado ranks 4th in education and 3rd in economy among all US states according to the U.S. News Colorado ranking report.

As a result, Colorado has a relatively high standard of living but also a high cost of living, ranking 35th according to the Missouri Economic Research and Information Center (MERIC) cost of living by state ranking.

The table below shows the cost of living in Colorado measured against the average score of 100.0.

Note: The original ranking has Puerto Rico, counted as a state.

Colorado’s cost of living score and USA ranking
Cost of living index105.5*35th
Groceries100.6*29th
Housing116.1*38th
Utilities90.99th
Transportation107.4*38th
Health102.0*35th
Miscellaneous103.0*33rd
*Scores above 100.0 indicate cost above the average
Source: meric.mo.gov

How to start a business in Colorado in 17 steps

If you’ve gotten this far, we’ll assume you’ve decided that starting a business in Colorado is the right thing for you (or you’re otherwise really interested in the topic). 

So, without any further delay, here are the 17 steps you should take to start a business in Colorado the right way.

Step #1: Develop your business idea in detail

The first step to starting a successful business is developing a winning idea — without it, this entire guide is pointless.

For starters, let’s discuss how to think of a great business idea.

First, it’s important to do a little introspection — what are some of your best qualities and things you are really good at? Is there anything you enjoy doing that could be monetized and that you wouldn’t mind doing for years to come?

Chances are your winning idea lies somewhere in the answers you’ll give to these questions.

If you really can’t think of anything, it might be a good idea to look at some of the most developed or profitable industries in your area. 

For example, some of the largest industries by revenue in Colorado, according to an IBIS World 2022 Colorado State Economic Profile overview, include:

  • Tourism,
  • Supermarkets and grocery stores,
  • New car dealerships, and
  • Drug, cosmetics, and toiletry wholesalers.

And, as Forbes reported in their list of best industries in 2022 by state, Colorado’s biggest industry in 2022 was the real estate and rental and leasing industry.

Knowing this, you could try to imagine how you would apply your skills to one of these industries. Think of some of the most successful businesses in those industries, analyze why they are successful, and try to think of a way to improve upon their product/service in some way.

When you’ve done this, you’ll likely already have a few niches in mind. To narrow down your choice and zero in on your winning idea, try combining 2 niches or 2 ideas to get something either unique, highly-specialized, or at the very least not overdone. 

A simple example of this would be combining sweets and fitness to get a shop that sells sweets that people on a strict diet can still enjoy — in other words, a fitness, low-sugar, high-protein ice cream or pancake place.

Step #2: Research the business value potential of your idea

Once you’ve settled on a business idea that excites you, the first thing to do is make sure that the idea actually has potential by performing a thorough market analysis.

In their article on how to conduct a business market analysis, Business News Daily states that a market analysis should answer the following 6 questions:

  • Who are your potential customers?
  • What are your customers’ buying habits?
  • How big is your target market (and how saturated is it)?
  • How much are your customers willing to pay for your product/service?
  • Who are your competitors?
  • What are their strengths and weaknesses?

These questions will help you perfect your product or service and make it as appealing to your customers as possible through presentation and marketing, while using your competitors as models for what you should and should not do.

New business owners might skimp over market analysis or skip it completely because it can get expensive and time-consuming, but it’s an important part of starting a business if you want to maximize your chances of success. 

So, if strapped for cash or time, you can perform market analysis through annual industry reports and small business statistics in your area, most of which are available online for free.

For example, if we take the new car dealership example from the previous heading, the Alliance for Automotive Innovation’s Colorado automotive economic insights report states that 236,700 new vehicles were sold in Colorado in 2022, for a total of $21.2 billion. 

This might sound impressive until you note that inventory shortages and high prices have put a damper on the industry, and new car dealership owners report significantly lower inventory and sales in 2022 compared to previous years, according to the Gazette Colorado auto dealers news report

So, even if a certain industry appears profitable at first glance, never start planning and spending your valuable budget before you’ve done your due diligence.

💡 Plaky Pro Tip

To find out more about the state of small businesses in the US and some of the most prominent trends throughout the past few years, read our small business statistics report for 2023.

Step #3: Choose your legal business entity

The first thing to do after thinking of a winning business idea is to figure out which type of business entity you want to start:

  • Sole proprietorship,
  • Partnership,
  • Limited liability company (LLC),
  • Corporation, or
  • Nonprofit.

In the next section, we’ll briefly go over each of their advantages and disadvantages.

Entity type #1: Sole proprietorship

According to the State of Colorado, sole proprietorship is the most common type of entity for small businesses. It refers to a type of business that is owned and operated by only 1 person.

The individual operating a sole proprietorship is indistinguishable from the business. Legally, they’re one and the same. In other words:

  • The responsibilities and liabilities accrued by the business are considered responsibilities and liabilities of the owner.
  • The owner pays business taxes as part of their income taxes.
  • The business is required to carry the owner’s name.

A sole proprietor who wants to operate their business under a name other than their own legal name must file for a trade name. You’ll find more information on trade names under the Name your Colorado business subheading.

Entity type #2: Partnership

A partnership is a type of entity where 2 or more people or entities share ownership of a business. Any type of unspecified partnership is considered a general partnership by default.

Just like sole proprietorships, general partnerships are not considered legal entities. In other words: 

  • The partners and the business are legally one and the same and the partners share profits, debts, and liabilities jointly and severally.
  • The partners file business profits and losses on their personal income tax returns.
  • Business owners who don’t want their partnership to carry their own legal names must register a trade name.

Besides general partnerships, there are 3 other types of partnerships that are considered legal entities:

  • Limited partnership (LP) — distinguishes between general partners with unlimited liability and decision-making power and limited partners whose liability is limited by the amount of their investment in the business. Limited partners are mostly passive investors and completely lack decision-making power. Limited partners are usually individuals, while general partners are mostly legal entities such as LLCs or corporations.
  • Limited liability partnership (LLP) — a partnership with 2 or more partners who are typically professionals in fields such as medicine or law. In cases of malpractice or another action that causes liability on the part of one of the partners, the other partners are not held responsible or liable.
  • Limited liability limited partnership (LLLP) — Colorado allows businesses to form LLLPs. An LLLP is a new type of partnership that’s almost identical to a regular LP, except that general partners also enjoy liability protection. That said, an LLLP doesn’t offer protection from liabilities caused by other partners.

When starting any partnership, it’s good practice to create a partnership agreement. Partnership agreements regulate how the partners will operate the business and share the profits and losses. 

Creating a partnership agreement is not necessary, but it is recommended in case there are ever any disagreements between partners.

💡 Plaky Pro Tip

If you ever end up in a tight situation where you want to make a change in your business and your partner disagrees, a convincing business case might help change their mind. Learn more about what a business case is and how to write it in our guide below:

Entity type #3: Limited liability company (LLC)

A limited liability company (LLC) is a legal entity separate from its members. This means that, in case of any liabilities, all the responsibility falls on the entity, while the members’ and the investors’ personal assets are protected.

The owners of a corporation are called members. LLC members can share control of the business and its profits equally, or they can customize their level of control and profit. Alternatively, members may choose to assign managers to manage the business in their stead.

LLCs also have the option to be taxed as partnerships or as corporations.

Entity type #4: Corporation

A corporation is a legal entity separate from its founders. Corporations are run by a board of directors but owned by shareholders. 

Unless specified otherwise, all corporations are considered C-corporations by default. C-corporations are typically larger, with no limit on the number of shareholders, and enjoy lower taxes. However, C-corporations are also subject to double taxation (both at the entity level and at the shareholder level).

Founders may choose to make their corporation an S-corporation. The “S” in the name stands for “small”. These small corporations only pass their taxes through to the shareholder level and are not subject to double taxation. But, they can only have up to 100 shareholders, none of whom can be nonresident aliens, partners, or corporations.

Entity type #5: Nonprofit

A nonprofit organization is an entity that’s formed for a purpose other than making money (educational, charitable, religious, scientific, etc.)

In Colorado, nonprofits can be formed as corporations or unincorporated associations, so they aren’t technically an entity, just an organizational type.

All nonprofit organizations formed for religious, scientific, literary, and educational purposes, or for the sake of public safety, prevention of cruelty against children or animals, or development of sports are eligible for tax-exempt status with the IRS.

💡 Plaky Pro Tip

If you’re planning to start a nonprofit or organize a nonprofit event, consider taking advantage of a free digital management tool and our event checklist that can help you organize your tasks and projects.

Step #4: Name your Colorado business

Whether you already have a business name in mind or you’re just about to think of one, the one thing you must do is make sure it’s unique. To do this, it’s best to think of a few options and then check if any of them are available using the Colorado Name Availability Search (for LLCs and corporations). 

Additionally, you may also want to do a Colorado Business Database search — it won’t show you whether a name is available or not, but it will show you similar existing names within the state of Colorado. 

If a name you were thinking of using is too similar to an already existing one, it has the potential to cause legal disputes in the future. So, it’s best to be prepared and seek legal counsel before making a decision.

Finally, you may also want to check for trademarks in Colorado. Trademarks are different from registered names and are governed by different laws. A name that turns up available in the Colorado Name Availability Search may still be trademarked and therefore unavailable. So, it’s always best to check.

Alternatively, you may want to trademark your business name and prevent others from using it.

How to make a business name distinguishable

In case your dream name is the same as or very similar to an already existing business name, there are a few ways you can tweak it and still make it unique in the eyes of the state:

  • Add or remove articles of speech (a, an, the),
  • Add or remove spaces,
  • Add or remove hyphens,
  • Add or remove brackets,
  • Use a different legal entity abbreviation, or
  • Register your business as a completely different legal entity.

To learn more about unique business names and the basics of starting a business in Colorado, we recommend you take a look at the Starting a Business in Colorado Tutorial by the State of Colorado.

Trade names (DBA)

Sole proprietorships and partnerships typically use the owner’s legal name or the names of the partners as the business’s true name. 

If sole proprietorships and partnerships want to outwardly use something other than their legal names as the name for their business, they must file for a trade name, otherwise known as “doing business as” (DBA).

Trade names are not exclusive (more than 1 business may have the same trade name) and therefore can’t be checked using the Colorado Name Availability Search.

To register a trade name in Colorado, fill out the appropriate Statement of Trade Name provided in the link, depending on the type of your legal entity. The fee is $20. Each consequent renewal of the trade name costs $5.

Step #5: Reserve or register your business name in Colorado

In case you’ve chosen a business name but are not ready to register your business yet, you may choose to reserve your business name to make sure no one takes it in the meantime.

You can reserve a business name by filing the Statement of Reservation of Name online. The reservation lasts for 120 days and costs $25. 

You may see the fees for this and all other forms in the Colorado Fee Schedule.

There is no need to register a business name separately from the business entity. A business name is considered registered once your business is registered. 

Step #6: Choose an appropriate location for your business

Location plays an important role in the success of most businesses for both marketing and legal reasons.

If you’re running a retail store, a fast food place, or a similar type of business that relies on high foot traffic to stay relevant, the right physical location can make or break your business.

However, even if your business doesn’t depend on high traffic, you should still pay attention to the location of your main business offices for 2 reasons:

  • Cost of rent and utilities, and
  • Zoning laws.

A business that does most of its work online (e.g. digital marketing, translation, content writing, etc.) will also do most of its marketing online and therefore won’t rely on foot traffic for success. Such a business can often afford to choose a cheaper, low foot traffic location, and can even be a home-based business.

However, all businesses should pay attention to Colorado zoning laws, which designate different areas within the city — such as residential area, industrial zone, commercial zone, etc. — and prescribe a different set of rules for doing business and erecting buildings within them. 

These laws prevent things like nightclubs opening in a residential area, for example.

In their article on things to consider when choosing your business location, Entrepreneur suggests you consider the following 10 things:

  • Your business style (high-end, casual, modern, etc.),
  • Your target demographics (your ideal customers, their location and age, but also your workforce demographics),
  • Foot traffic in the area,
  • Accessibility and parking,
  • Proximity of your competition,
  • Proximity of other businesses and services,
  • Possible ordinances and zoning laws,
  • Building infrastructure (whether the building has everything your business will need, including good ventilation, electrical wiring, internet, whether it fits the regulations specific to your business, etc.), and
  • Utilities and other costs.

Step #7: Register your business in Colorado

Once you have your business name and you’ve chosen your preferred business entity, it’s time to start thinking about registering your business with the State of Colorado.

Sole proprietorships and general partnerships are the easiest businesses to form and don’t require any complicated paperwork (more on this in further text). 

However, to form an LLC, a corporation, or other types of partnerships, you’ll need some bits of information we haven’t talked about yet, including a registered agent. So, let’s go over that first.

Designate a registered agent

A registered agent is a person or entity that has the authority to receive service of process notices and other legal documents and important correspondence on behalf of an existing business and then forward that mail to the business.

According to the State of Colorado, every business that has been established by filing documents to the secretary of state must keep a registered agent who is:

  • A consenting individual of least 18 years who lives or operates a business primarily in the State of Colorado,
  • A domestic business that mainly operates within the State of Colorado, or
  • A foreign business authorized to operate within the State of Colorado.

As per the official information, an entity whose usual place of business is in the State of Colorado may be its own registered agent.

You may change your registered agent at any time, but you must have a registered agent at the time of registering any business aside from a sole proprietorship or a general partnership.

How to register a sole proprietorship in Colorado

It isn’t necessary to register a sole proprietorship with the State of Colorado. An individual may start a sole proprietorship by simply doing business and then paying taxes for that business on their personal tax returns. No official documentation is necessary.

For example, if you’re in the business of knitting and selling scarves, all you need to do is include the earnings and taxes on those earnings in your annual income tax return.

That said, sole proprietors must still obtain licenses and permits that their businesses require (if any).

Besides this, there are 2 other optional, but recommended steps sole proprietors should take:

  • Obtain an Employer Identification Number (EIN) — sole proprietorships don’t need an EIN unless they plan to hire employees. They can function by using the owner’s social security number instead. However, it’s safer to get an EIN than to write your personal social security number on all business-related documents.
  • Register a trade name (DBA) — the name of a sole proprietorship is the owner’s legal name since the individual and the business are considered one and the same. But, you’ll likely want to change this for the sake of marketing, if nothing else. The only way to do this is to file for a trade name. Keep in mind that this won’t change the true name of your business, just its alias.

How to register a partnership in Colorado

General partnerships work exactly the same as sole partnerships, only with 2 or more people involved. 

There is no need to file any documentation with the State of Colorado to register a general partnership, and the EIN and trade name are also optional. But, you might need certain licenses or permits, depending on the type of business you’ll be running.

That said, there are 3 other types of partnerships besides general partnership, and they have to be registered with the state using the following forms:

These forms all cost $50 and will ask you to provide the following information:

  • The name of the business,
  • The true name of your partnership (for LLPs and LLLPs),
  • The address of your primary business location,
  • Registered agent’s name and address, and
  • True name and address of the person submitting the form and/or the general partner (for LPs and LLLPs).

How to register an LLC in Colorado

To register a limited liability company (LLC) in Colorado, you’ll need to fill out the Articles of Organization form online (paper form is not available). The fee for registering an LLC in Colorado is $50.

The form will ask you to provide the following information:

  • Full name of the business (including the desired entity abbreviation),
  • The address of your primary business location and mailing address,
  • Registered agent’s name and address,
  • Legal name and address of the person forming the LLC, and
  • Name and address of the person submitting the form.

How to register a corporation in Colorado

To register a for-profit corporation in Colorado, you’ll need to fill out the Articles of Incorporation for a Profit Corporation online (paper form is not available). The fee for registering a corporation in Colorado is $50.

The form will ask you to provide the following information:

  • Name of the corporation,
  • The address of your primary business location and mailing address,
  • Registered agent’s name and address,
  • True names and addresses of all the incorporators, 
  • Type of stock, and
  • Name and address of the person submitting the form.

Bylaws should not be added to the Articles of Incorporation — they stay with your corporation.

How to register a nonprofit in Colorado

When registering a nonprofit in Colorado, you may choose to register it as a nonprofit corporation or as an unincorporated nonprofit association.

To register a nonprofit corporation in Colorado, you’ll need to fill out the Articles of Incorporation for a Nonprofit Corporation online (paper form is not available). The fee for registering a corporation in Colorado is $50.

The form will ask you to provide the following information:

  • Name of the nonprofit,
  • The address of your primary business location and mailing address,
  • Registered agent’s name and address,
  • True names and addresses of all the incorporators,
  • Description of the distribution of assets, and
  • Name and address of the person submitting the form.

As for the unincorporated nonprofit association, the only thing you need is the Statement Appointing an Agent (registered agent). This statement cannot be filed online, and the fee is therefore higher, at $150.

This form will only require you to provide:

  • True name of the nonprofit,
  • Entity name (if any),
  • The address of your primary business location and mailing address, and
  • Registered agent’s name and address.

As mentioned earlier in the text, nonprofits have the option to file for tax-exempt status. If you find your nonprofit eligible, file for tax exemption directly with the IRS.

Step #8: Get the necessary licenses and permits

Business owners do not require a general business license to operate a business in Colorado. However, businesses will often need business-specific licenses.

State-regulated entities should apply for a license with the Department of Regulatory Agencies (DORA). The list of all entities regulated by DORA and the licenses they require are listed in a table at the bottom of the page linked in this paragraph.

In case you can’t find your business type on the list of businesses regulated by DORA, visit the Additional State Regulatory Services to see business types regulated by DORA sister agencies.

Some licenses are issued by local city or county offices. So, check with your city hall or county clerk if you can’t find your business type in either of the lists provided above.

Obtain a Sales Tax License

All businesses that sell tangible goods in Colorado require a Sales Tax License (services and commodities are not taxed). There are several types of Sales Tax Licenses in Colorado:

  • Standard Retail License (Sales Tax License) — a standard license that fits most businesses that make retail and wholesale sales in Colorado. There is no need to obtain a Wholesale License if you sell wholesale but already have the Standard Retail License. To apply for this license, use the MyBizColorado page or the CR 0100 Application if you have only 1 business location. For 2 or more business locations, use the CR 0100 Application only.
  • Wholesale License — for those who sell wholesale in smaller amounts. A Wholesale License costs $16, lasts 2 years, and allows you to have up to $1,000 worth of sales per year without being required to obtain a retail license. To apply for a Wholesale License, fill out the same CR 0100 Application linked above.
  • Mobile Vendor License — all mobile vendors (e.g. ice cream truck), must have a Sales Tax License for their primary business office along with all the jurisdiction sites where they will be making sales.

Note: the licenses above only cover state taxes. Some cities in Colorado (including Denver) are so-called “home rule” cities that have their own additional set tax rules.

Businesses that will serve as manufacturers and suppliers or that will import goods and distribute them to other businesses should apply for a Colorado Supplier License.

Step #9: Obtain federal and state tax IDs

All business entities operating within the United States must pay their taxes regularly. To do this, businesses must obtain a federal business ID.

An Employer Identification Number (EIN) is a unique federal ID issued by the IRS that businesses use to file their tax returns. You can apply for an EIN for free, either online, by fax, mail, or by telephone.  

If you apply for an EIN online, you will get your ID number instantly.

Step #10: File state taxes in Colorado

Every state has unique state tax requirements. In Colorado, business owners are required to file the following taxes with the state:

  • Sales and use taxesservices and commodities are not subject to sales and use tax in Colorado — only tangible goods. To pay sales tax, you must first have created an account with the Department of Revenue by filling out the CR 0100 Application linked earlier in the text. To file a sales tax return, pick the appropriate form for your business from the list provided in the link and follow the given instructions.
  • Business income taxes — any business entity that’s required to file a federal tax return must also file business income tax with the State of Colorado. To file business income tax in Colorado, pick the appropriate form from the list based on your business structure and follow the instructions given.

For other, business-specific taxes — such as nicotine products tax, marijuana tax, liquor tax, fuel tax, and more — visit the Colorado Department of Revenue’s excise and fuel tax page.

Nonprofits that are eligible for tax exemption with the IRS are also eligible for Colorado Sales Tax Exemption. To obtain it, nonprofits must first obtain tax exempt status from the IRS and then fill out the DR 0715 form.

Step #11: Make a clear business plan

A business plan represents a clear overview of your business structure and identity and a roadmap that outlines your plans for the future.

A business plan is an optional document. For the most part, it’s for personal use and should serve as a reminder of your direction and goals.

That said, investors and banks may ask you to provide a business plan for review before they decide whether they want to invest in your business or give you a loan. This is why it’s important to have one ready in case you ever need it.

A business plan should be kept relatively short and to the point. SBA differentiates between 2 types of business plans — a lean startup plan and a traditional business plan.

A lean startup plan is a very short plan that only provides a quick overview of key business plan elements, often on a single page, while still following the structure of a traditional plan.

On the other hand, a traditional business plan is often 10–12 pages long and, according to the Colorado SBDC business plan outline, it has the following structure:

  • Executive summary,
  • Business description,
  • Industry background information,
  • Business organization plan,
  • Marketing plan,
  • Financial plan, and
  • Supporting documents.

The information layout/order and naming conventions in different business plans can vary, but they all generally contain the same information.

Section #1: Executive summary

The executive summary is as it sounds — a short, 1-page summary of the most important points from the business plan. It should contain:

  • Your elevator pitch,
  • Your business and ownership structure,
  • Reasons why you strongly believe your business will succeed, and
  • The financial proposal.

Since the executive summary is mainly meant to be read by banks and investors, the main focus of the executive summary should be the financial proposal part. Make sure to explain:

  • Why you need the loan/investment,
  • What you’ll do with it,
  • How it will impact your business and possibly the community,
  • How you will repay the loan,
  • How much money you need, and
  • What your collateral will be.

Investors don’t always read the entire business plan, so the executive summary should contain all the information they might need or want to know, written as concisely and clearly as possible.

Section #2: Business description

This is where you can introduce your business in a little more detail. It’s recommended that you state your business status (start-up, buy-out, expansion, etc.) and explain your mission and main goals first. 

You can even go further and state your milestones, target revenue, employment goals, etc.

Make sure to include both short-term and long-term business goals.

If you’ve bought an existing business, you may also quickly recount the history of the business and explain how you plan to change/improve things. 

Section #3: Industry background information

In this section, you should provide the results of your market analysis that we discussed at the beginning of this guide. In other words, describe your industry and explain where your business will fit within it. 

Take note of important trends and possible future trends and how you plan to leverage them or stand out by avoiding them. You might also discuss the current economic conditions and how they will impact your business.

This section should convey that you understand the industry and the market and explain how your plans are based on that understanding.

Section #4: Business organization plan

The business organization section should explain how your business will be structured and how it will take care of its employees. Include information on:

  • What your business structure is,
  • Who will manage your business and what their experience is,
  • What will be the responsibilities of the manager(s),
  • Your organizational structure,
  • Desirable employee skills, potential training you’ll provide, and estimated salaries,
  • Licenses and permits your company needs, 
  • Zoning regulations that will affect your business, and
  • Potential risks you may face along with the insurance you plan to acquire.

Section #5: Marketing plan

The marketing plan section is where you will discuss your product or service, what problem it solves for the customer, and how you will market it. If you have ideas, you might also discuss future products or services you might expand to.

The marketing plan section is also where you will present your market analysis in full:

  • Your ideal customer,
  • Your target demographics,
  • Your main competitors,
  • Your plan to outperform the competition,
  • Market potential,
  • How your location plays into the success of your business, and anything else you might find would be helpful in convincing your potential investors to support you.

Finally, after the analysis, discuss your marketing strategies. This can include:

  • Your location,
  • Packaging/presentation,
  • Product/service distribution,
  • Prices,
  • Advertisement, and anything else that can affect your business reputation and exposure.

Section #6: Financial plan

Arguably the most important part of the business plan, the financial plan should contain clear data and numbers that include:

  • Assumptions and earning projections on a monthly, quarterly, and yearly basis,
  • Break-even analysis,
  • Projected balance sheet and income statement,
  • Summary of financial needs,
  • Latest balance sheets, income statements, and tax returns (if the business is an existing one),
  • Where you plan to invest the funds, and 
  • How exactly you plan to return them.

For more ideas about what exactly to include in your business plan, refer to Colorado SBDC’s business plan outline.

Section #7: Supporting documents

The supporting documents section is optional, and it can contain a variety of additional information, such as:

  • Your employee resumes, 
  • Reference letters, 
  • Research material, 
  • Images,
  • Various documents, such as deeds, leases, patents, contracts, etc.

If you look at the business plan as a document that will help you obtain funding, the supporting documents section should contain anything you believe will convince the bank or potential investors that you’re fully prepared and determined to succeed and make their investment worthwhile.

Step #12: Secure the necessary funding for your business

While registering a business is not expensive in Colorado, new businesses need much more than just official business documents — they need offices, equipment, employees, insurance, utilities, marketing, and much more. 

This is why acquiring the necessary funds that will cover all expenses is so important before you officially open.

Typically, people opt for 1 or more of the following funding options:

  • Self-funding or partnerships,
  • Small business loans,
  • 401(k) business financing,
  • Investors,
  • Crowdfunding, or
  • Grants. 

Option #1: Self-funding/partnerships

Most of the time, people will have some sort of personal fund they’re willing to invest in their business. Sometimes, that fund is substantial enough to cover all expenses of a new business. This type of funding is also called bootstrapping.

Alternatively, if people don’t have enough money to fund everything on their own, they might look for a partner with whom they might share expenses. However, this means that the ownership of the business is equally divided between 2 people. 

If you opt for this form of funding, keep in mind that all business decisions will have to be made by unanimous agreement, which can occasionally lead to disputes.

Option #2: Small business loans

Small business loans are another popular means of acquiring funds for a new business venture, often used in combination with self-funding or partnership.

To get a business loan, you’ll need an EIN, a bank account, and good credit history.

To figure out which business loan will work best for you, research what the banks or credit unions on your shortlist are offering.

One of the common ways owners decide to get small business loans is through the U.S. SBA loan program. The U.S. Small Business Administration guarantees loans for any type of business, small or large, and helps reduce the risk of taking out loans.

401(k) business financing

If you were wondering if there was a way to get a large sum of money without going into debt, the answer is yes. It’s called 401(k) business financing and refers to taking out money from your retirement fund to start a business. This is often also referred to as “Rollovers as a Business Startups” or ROBS for short.

You might have heard of people using parts of their 401(k) fund to invest. Think of it as the same thing, except you’re investing in yourself. That said, using your 401(k) is risky business, so take care not to use up all of it, just in case.

Option #3: Investors

Typically, there are 2 main types of investors — angel investors and venture capitalists.

Angel investors are often wealthy individuals who are willing to invest small sums in promising startups and rarely get involved in business management. 

It’s possible to meet potential angel investors at local gatherings of entrepreneurs and small business owners, entrepreneur summits, through mutual acquaintances, or via websites that connect angel investors with entrepreneurs looking for funding.

Some gatherings of entrepreneurs you might consider in Colorado include:

  • San Luis Valley Entrepreneurship Summit,
  • Rural Entrepreneurship Summit, or
  • Women Entrepreneurship Day (WED) Colorado Summit.

You can also look up upcoming annual entrepreneurship events hosted by Colorado Mesa University.

On the other hand, venture capitalists are typically other companies that tend to invest large sums of money. As such, they have larger stakes in your business and are willing to go to greater lengths to help you in a moment of need, provide money, knowledge, or staff. 

However, this will require you to relinquish a portion of your control over your business to them.

Option #4: Crowdfunding

The term crowdfunding refers to accepting small amounts of money from many “mini-investors”. Crowdfunding is most commonly done through Kickstarter, Indiegogo, GoFundMe, and similar crowdfunding websites.

Crowdfunding is a great way to get the resources you need for your business since it doesn’t require you to share control of your business with the investors, nor does it require you to return the money you get. 

The only thing that’s expected of you is to offer some sort of a benefit to the people who helped you fund the business, such as early access to your product, a discount on your service, additional, limited-series material, etc.

However, crowdfunding works best when you have a unique idea, make a unique product, or have a large social media following. Therefore, it isn’t the most reliable source of funds for regular small businesses such as clothing stores, law firms, car mechanics, etc.

Option #5: Grants

Grants are a great source of funding for a new business, but they’re not for everyone.

A business grant is a monetary support from your government. 

Since the money for grants comes from a state fund, the only businesses that are eligible for grants are those that in some way stimulate the economy or provide some kind of public or scientific benefit. 

Additionally, all businesses that apply for grants must pass a selection process and might not receive the grant in the end.

Step #13: Open business banking and credit accounts

It is recommended that business owners open a business checking account with their preferred bank where they will keep and manage all their business transactions. This is important for several reasons:

  • It keeps your business and personal accounts separate, making it much easier to calculate your taxes.
  • It creates a clear separation between you as an individual and your business. This is especially important for liability protection with businesses that count as separate entities (LLC, corporation, etc.) — if a business is considered a separate entity, its transactions cannot be on your personal account.
  • It allows you to take out bank loans.
  • It helps you accrue good credit history for your business.

Alternatively (or in addition), you might also want to consider joining a credit union. Credit unions are less convenient than banks in that they don’t exist in as many locations, offer fewer services, and might even require membership fees. But they offer higher interest rates on savings accounts, if that’s what you’re primarily interested in.

Step #14: Get business insurance

Just like you would get insurance for your house or car, there are certain types of insurance you should get for your business. These fall under 2 categories — optional and mandatory insurance.

Mandatory business insurance in Colorado

Mandatory business insurance in Colorado includes:

  • Workers’ compensation insurance — offers lost wage and medical benefits to employees who get injured at work. All Colorado businesses that have employees operating within the state are legally required to have this insurance, even for part-time employees. This insurance must be purchased from private insurance companies since there is no official State of Colorado worker’s compensation fund.
  • Unemployment insurance — offers bi-weekly compensation to former employees who were laid off through no fault of their own.
  • Professional liability insurance — also called Malpractice insurance or Errors and Omissions (E&O), this insurance protects a business’s reputation and covers damage costs to customers. This type of insurance is necessary for some businesses (medical institutions, law and architecture firms, title and real estate agents, and mortgage brokers), but optional for others. (source linked at the bottom of the heading)
  • Automobile insurance — according to Colorado law, all business vehicles, owned or leased, must be insured. This insurance covers compensation for bodily injury and vehicle and property damage in case of an accident.

Optional business insurance in Colorado

Optional insurance covers insurance that protects your business and your business assets, and it includes, but is not limited to:

  • General liability insurance — protects from any external lawsuits and covers compensation for bodily injuries, property damage, and lawyer and court fees.
  • Cyber liability insurance — protects your business from cyber breach claims and covers damages in case your business suffers a cyber breach.
  • Property insurance — protects your business from property damage and losses.
  • Healthcare Coverage and Affordable Care Act — according to DORA, businesses in Colorado aren’t required to pay employees health insurance. However, small businesses with fewer than 25 employees who do so can qualify for up to 35% tax credit to compensate for the costs of health insurance.

Most of the information related to business insurance in Colorado was found on the Colorado Department of Regulatory Agencies, Small Business Insurance webpage. To find out more about the different types of business insurance you may get, follow the provided link.

Step #15: Hire employees

Hiring employees comes with its own set of responsibilities and taxes for employers. But let’s start from the beginning.

New employers must register their business for the MyBizColorado Unemployment Account and get an unemployment identification number. 

After hiring a new employee, the employer must report the new hire to the Office of Economic Security within 20 days of the first day of employment.

All employers that pay wages must withhold wage tax in Colorado. As a general rule, all situations that require federal wage withholding also require wage withholding in Colorado. Employers may remit withholding taxes on a weekly, monthly, or quarterly basis and report the amount remitted for each employee on a W-2 form.

For further information on how to remit withholding tax or a tax withholding tutorial, visit the Colorado Department of Revenue website.

Step #16: Choose the right business software

The amount of work and processes business owners need to stay on top of is overwhelming — written notes and simple to-do lists simply don’t cut it. This is why most businesses choose to use some form of task management software.

Task management software, sometimes also called project management software, is organized in a way that offers users an easy overview of all their tasks and processes that are in progress, impending, or waiting to be completed. 

In Plaky project management software, users can organize their tasks in a table or Kanban view, and for each task, they can:

  • Assign the person/people to the tasks they are meant to perform, 
  • Assign due dates, 
  • Add tags, statuses, descriptions, files, etc.,
  • Get informed whenever a change is made to a task you’re subscribed to, 
  • Quickly start working on new projects by making use of the many fully customizable and editable project management templates and much more.
Task overview and activity log in Plaky
Task overview and activity log in Plaky

Task management tools are the perfect solution for small businesses that are looking to establish better work organization and improve communication between their employees or teams. They also offer a one-stop tool for remote or dispersed teams.

Most task management tools are created to be intuitive and user-friendly, but the more features they have, the more complicated they inevitably become (and often more expensive too). 

So, if you’re looking for a cheaper option that can replace the likes of Asana, monday.com, Trello, ClickUp, and similar software, there are task management tools out there that fit that description.

💡 Plaky Pro Tip

If you’re interested in finding seeing how Plaky compares to each of these popular tools, take a look at the pages below, where you can see a side-by-side feature comparison:

Step #17: Build an internet presence

This guide wouldn’t be complete without a reminder of the importance of an active internet presence for any small business.

The Internet should be a vital part of your business marketing strategy. The extent to which it’s important may vary depending on your industry and the activities it focuses on. 

A construction business may only have a business website with images of their prior work, their awards, achievements, and contact information. A doctor’s office will likely allow making appointments online, while a graphic design or marketing business may fully operate on the web.

Regardless of which category you fall into, having an internet presence is a must. 

In the following section, we’ll go over 3 things you should do once you establish your business to legitimize your business in the eyes of your customers and extend your reach.

Step #1: Create a Google business account

People don’t read newspapers to find out when a new business has opened in their vicinity. Nor do they flip through the yellow pages to find the number and address of the business they’re looking for. 

Instead, they google it. And, if they don’t find it, chances are that they’ll assume it doesn’t exist.

This is why having at least a working and updated Google business account is non-negotiable for any new business.

This will allow you to showcase your working hours, phone number, location, and images of your business to anyone looking for your business specifically. 

But, it also has the added benefit of showing your business to people in your vicinity who are interested in the type of work you do but are still only browsing — it’s a chance to let them know that your business is an option.

Creating a Google business account is free and simple, and it doesn’t require much maintenance besides occasionally updating old images and outdated information. So, even if you don’t follow any of the other steps suggested below, at least follow this one.

Step #2: Create social media profiles

Most likely, at least 90% of the people you know use social media in some capacity. This is where people hang out these days, and if you want them to find out about your business, that’s where you have to be as well.

This can be in the form of a social media account or in the form of paid ads, as long as you’re using social media platforms to reach your customers in some way.

That said, having a social media account is free, and if you’re active enough, it will likely work better than paid advertising anyway. So, there’s no reason not to have one or two. 

Just pay attention to keep to the social media platform(s) that your audience uses the most (you should identify this during your market analysis). 

For example, TikTok is mostly used by Gen Z and younger people for fun or very short educational videos.

Instagram is mostly used by Gen Z and Millennials to share aesthetically pleasing images or educational/creative video content that’s slightly longer than TikTok.

Facebook and LinkedIn are mostly used by Millennials or older generations, with LinkedIn being more focused on business content, rather than fun and aesthetic content.

Another option is YouTube — a highly-visited platform across all demographics, but one that requires the most amount of effort to create engaging content.

All of these cater to different audiences, but there might be overlap, which is great — this means you can repackage and reuse content for different platforms with minimal effort for maximum results.

💡 Plaky Pro Tip

If the thought of designing and creating social media content on a regular basis sounds intimidating, visit our guide on creating and managing social media posts:

Step #3: Create a business website

Finally, if you’re serious about your business and have the means to maintain a website, creating one would give you a serious advantage over competitors that don’t have it. 

Forbes answers the question of why you need a website as a small business and one of the reasons is that a well-designed and functional business website gives you a level of credibility and legitimacy. But it also costs money on a monthly basis, and you may have to hire someone to make it for you.

However, there are ways around this. These days, there are website builders like WordPress or Squarespace that allow you to create a website even if you don’t know how to code. 

Alternatively, if you want something cheaper, you could use websites like Hostinger or Bluehost to host your website and minimize your expenses in that way.

That said, a badly designed or dysfunctional website is worse than no website. So, it’s best to do it well or not commit to it at all. In many cases, simple Google and active social media accounts will do the trick.

💡 Plaky Pro Tip

Starting your own business is not an easy task. But if you need a reminder why it’s worth it, take a look at these inspiring small business quotes:

FAQ about starting a business in Colorado

In this section, we’ll cover the most frequently asked questions when it comes to starting a business in Colorado.

How much does a business license cost in Colorado?

There is no general business license requirement in Colorado. Businesses will likely need to obtain other, business-specific licenses, but their prices vary depending on the industry and specific activities within that industry.

How to start a small home business in Colorado?

The best way to start a small home business in Colorado is to form a sole proprietorship. 

A sole proprietorship doesn’t require any initial capital to start, nor does it require any documentation to be filed with the state, making it the ideal structure for small businesses.

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

To start an LLC in Colorado, you need a minimum of $50, which is the price of the Articles of Organization. 

The price increases if you decide to:

  • Reserve your business name ($25), 
  • Rent a business office,
  • Acquire equipment,
  • Obtain licenses specific to your business type,
  • Buy an internet domain name, etc.

Is Colorado a good state to start a business?

Yes, Colorado is a good place to start a business. The state has a favorable business climate and an overall tax score of 5.17 out of 10.0, placing it in the 21st place in the overall ranking of US states according to their tax favorability. 

In 2022, Forbes ranked Colorado 2nd on their list of the most favorable states to start a business in the US.

Additionally, 99.5% of all businesses in the state are small businesses and Colorado is also home to 9 Fortune 500 companies, according to the Colorado Office of Economic Development and International Trade. 

Do you need a business license for an LLC in Colorado?

Colorado does not require businesses to have a general business license. However, most businesses will need some sort of business license specific to their line of work. The same goes for LLCs.

Is Colorado a tax-friendly state?

Colorado is the 21st tax-friendly state in the US, with an overall tax score of 5.15 out of 10.0, which makes it slightly above average. 

However, some Colorado cities also levy additional taxes that aren’t part of these statistics. But, even with that, Colorado is a fairly tax-friendly state.

What is the most profitable industry in Colorado?

The most profitable industry in Colorado is the oil drilling & gas extraction industry, according to the IBIS World 2022 Colorado State Economic Profile.

Does Colorado have business income tax?

Yes. Business owners in Colorado are required to pay business income taxes. As a general rule, every business that pays a federal income tax return is also required to pay business income taxes.

Colorado business resources for further reading

In this guide, we’ve collected the most important general information you need to know to start a business in Colorado. 

But, depending on your personal circumstances and the specific kind of business you want to start, you will likely need to do more research. 

For this purpose, we’ve created a list of all the websites that offer reliable information related to starting a business in Colorado:

  • Colorado Secretary of State — here, you’ll find all the pricings and necessary forms you’ll need to fill out to register a new business, your business name, and trademarks, make any sort of legal changes to your business, business registration checklists, etc., including very helpful FAQs and step-by-step instructions on how to do each of these things.
  • Colorado Department of Revenue (Taxation Division) — offers detailed explanations of all the taxes small businesses need to file, including the forms necessary to file the taxes.
  • Colorado Department of Revenue (Revenue Online) — another useful website that offers information about taxes for small businesses and employers. Revenue online focuses mostly on digital payments, payment requests, tax training, and it’s a place where you can find out more about local taxes.
  • Colorado Department of Labor and Employment — offers all the information employers need to know about hiring and keeping employees and laying off staff. It also offers information about workers’ compensation, unemployment benefits, workforce centers, safety regulations, etc.
  • Colorado Official State Web Portal — the official website of the State of Colorado that connects all the abovementioned links.
  • MyBizColorado — official online filing tool for the State of Colorado.
  • Department of Regulatory Agencies — these are the agencies that regulate businesses in Colorado. The website offers information about business licenses, insurance, real estate, etc. It also includes a searchable database of occupations and businesses.
  • Colorado Office of Economic Development and International Trade — offers information on different business incentives, grants, programs, and credits for minorities and different industries.
  • Colorado Small Business Development Center (SBDC) — offers free consultations and training for existing and emerging businesses in Colorado, disaster relief,  and other useful resources for entrepreneurs.
  • U.S. Small Business Administration (SBA) — keeps helpful blog posts on the topic of starting a business in different states, and offers small business loans.
  • Internal Revenue Service (IRS) — here, you’ll find all the information and forms needed to properly file your federal taxes.

Starting a business in Colorado — Conclusion\Disclaimer

Hopefully, this guide has answered your questions regarding how to start a business in Colorado, or at least offered you a solid foundation for further research.

That said, please note that we are not authorized to provide legal advice. We strongly advise that you consult the appropriate Colorado institutions and/or certified professionals before making any decisions related to your business. Within the text, you’ll find links to official Colorado state websites where you can find reliable and up-to-date information.

Also keep in mind that this guide was written in Q3 of 2023 and might not contain amendments to the laws and regulations in Colorado that have been adopted since then. Within the text, you’ll find links to official Colorado state websites where you can find reliable and up-to-date information.

Plaky is not responsible for any losses or risks incurred, should this guide be used without further guidance from legal or tax advisors.

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