How to start a business in Colorado [Updated 2024]

A breathtaking landscape, strong support for small businesses, and a central location make the state of Colorado an attractive place for entrepreneurs. Thinking of starting your own business in the Centennial State? Welcome to the party! There are nearly 700,000 small businesses in Colorado that account for 99.5% of all businesses statewide. In 2020, small businesses were responsible for $255 billion (yes, with a B) of economic output. 

There’s never been a better time to hang out your shingle in Colorado. Our guide takes you through all the critical steps to turn your idea into a thriving business. 

The first step is to put together a solid business plan. This includes a description of your enterprise, market research, and an estimate of your startup costs. Armed with your plan, you’re ready for the next steps: choosing a business structure, registering with state authorities, and navigating state and federal taxes.

It sounds like a lot, but if you take it one step at a time, you’ll be up and running in short order. Our step-by-step guide will help you establish a business in Colorado quickly and cost-effectively.

1. Name your business

A great business idea needs a great name. However, you need to make sure that your name is compliant with Colorado statutes. These are the steps: 

• Search the Colorado Secretary of State’s business name database to see if your name is available. 
• Check that it meets Colorado’s naming regulations. 
• Check that your name hasn’t already been trademarked on the US Patent and Trademark Office’s search system. 
• If your name is accepted on the Secretary of State’s business name search database, you can apply to reserve your name. This gives you 120 days to set up your business entity (see below). There is a $25 fee, and the name reservation must be filed electronically.

Once your business name is approved, it’s an excellent time to secure your domain name and related social media handles. 

Sometimes, you may want to use a different business name than the “true name” your business is registered under. You might do this if you’re a sole proprietor and want to use a name other than your personal name or if you want to use a name that’s different from your business's original registration. 

If you plan to use a trade name, you’ll have to file a Statement of Trade Name with the Colorado Secretary of State. This must be done online and costs $20. 

2. Explore your funding options

There are numerous ways to fund your business: your own money, outside investors, and loans. It’s definitely worth looking into Colorado’s business grants and small business loans, too. The Colorado Office of Economic Development and International Trade (OEDIT) is an excellent place to start. Here’s a sampling of what’s available: 

• Colorado state loan programs. Colorado has a slate of programs available to help businesses obtain funding. Some, like the Cannabis Business Loan ($50,000 to $150,000 with favorable terms), are specific to certain industries. Others, like the Colorado Startup Loan Fund (loans of $10,000-$150,000 with favorable terms), are more general in scope.
• Federal loan programs. Funding programs, disaster relief, and business counseling are available through the Small Business Administration (SBA). 
• Local grants and loans. The Colorado office of the SBA is a good local resource, as is the Colorado Small Business Development Center (SBDC) Network. You’ll find information on COVID-19 support here as well. 

3. Decide on your business structure 

It doesn’t matter what size of company you’re launching; you’ll have to choose a business structure. Picking the right one is one of the most important business decisions you’ll make. In Colorado, there are several business types to choose from. Sole proprietorships and partnerships are the most common. Here’s what you need to know about business formation in Colorado: 

4. Register your business in Colorado

If you’re operating your business as a sole proprietorship, registering with the Colorado Secretary of State isn’t required. However, if you’re operating a sole proprietorship with a trade name, you’ll have to file some paperwork (see below).

For all other business structures in Colorado, you’ll have to register and pay a filing fee ranging from $50 to $150. Find the information, documents, and costs below.

5. Decide on a registered agent

In most cases, if you’re registering a business in Colorado with the Secretary of State, you’ll need to assign a registered agent. Registered agents (you or a professional) are the official point of contact for your business, and they receive legal and tax documents sent to you.

Anyone can be a registered agent if they have a physical address in Colorado. It’s simply a matter of registering with the Secretary of State when you form your business entity. If you prefer, you can use a professional registered agent. The cost of these services depends on the level of service required. Expect to pay between $50 and $200. The benefit of using professional services is that nothing will get lost in the mail. 

6. Apply for an Employer Identification Number

An Employment Identification Number (EIN) is required before you can hire and pay employees in the US. EINs are nine-digit numbers that are unique to individual businesses. Think of it like a Social Security number but for your company. 

EINs are needed to open business bank accounts, apply for loans, obtain business licenses, file tax returns, and pay your staff. EINs are assigned by the Internal Revenue Service (IRS). There’s no cost; you can get yours by applying online or by mailing or faxing Form SS-4 to the IRS.

7. Get up to speed with Business Tax Credits

Paying taxes is a fact of life for individuals and businesses. However, there are ways to reduce your tax burden. One way is to take advantage of federal and state tax credits. Here are some of the programs and tax credits available for Colorado Businesses: 

• Work Opportunity Tax Credit (WOTC): This tax credit can reduce an employer's federal tax burden by up to $9,600 per new hire from certain groups of job seekers, including veterans and formerly imprisoned people.
• Job Growth Incentive Tax Credit: Provides a state income tax credit equal to 50% of the Federal Insurance Contributions Act (FICA) paid by the business on the net new job growth for each calendar year.
• Advanced Industries Accelerator Program: Provides grants and investment tax credits for job creation and innovation. Available to businesses developing advanced technologies and operating in one of Colorado’s advanced industries:
• Advanced manufacturing
• Aerospace
• Bioscience
• Electronics
• Energy and natural resources
• Infrastructure engineering
• Technology and information
• Rural Jump-Start Tax Credit: Tax credit to assist new businesses starting in or moving into rural, economically distressed areas and hiring new employees.

8. Stay on top of filing requirements and taxes

Like other states, Colorado requires you to file business and tax documents annually. Businesses subject to reporting requirements, such as limited liability companies, corporations, nonprofit corporations, and foreign entities, are legally obligated to annually submit a Periodic Report to the Colorado Secretary of State. The report ensures your information is up-to-date, and it maintains your “good standing” with the Secretary of State. You can file your Periodic Report electronically via the Secretary of State’s website. Your filing date is available from the same website. 

Other filing requirements differ depending on the structure of your business. Here are the basics:

• Sole proprietorship: Income is filed on your individual tax return. Learn more about filing your taxes from the Colorado Department of Revenue.
• LLC: In most cases, Colorado LLC taxes are passed through to the owner's personal tax return (Form 1040). Filed annually. 
• Partnerships and S-Corporations: In most cases, taxes are passed through. Complete your federal income tax return and use that information to file a Colorado income tax return. You must also file Colorado K-1s (DR 0106K) for each partner or shareholder. 
• C-Corporations: The filing process for C-Corporations is separate from individual tax filings and quite complex, with the rules changing from year to year. The Colorado Department of Revenue has the latest information and guidance on its website. 

9. Find a payroll solution

There’s much to consider when hiring employees or contractors in Colorado. It’s vitally important that you classify them correctly; otherwise, you could face fines and other penalties. You’ll also need to keep on top of overtime regulations. In Colorado, employees must be paid 1.5 times their regular rate of pay for working more than 40 hours per workweek, 12 hours per workday, or 12 consecutive hours, regardless of the start/end of the workday (Workweek and workday definitions are here). Colorado’s minimum wage in 2024 is $14.42, which is higher than the federal rate ($7.25). Some local jurisdictions can set their own minimum wage. For example, Denver’s is $18.29.

Payroll software is necessary if you want to make sure that you pay your employees and contractors correctly and on time. Rippling can streamline the tedious payroll process and stay compliant with overtime regulations. Rippling Time & Attendance is a payroll solution that tracks employee hours and alerts you if an employee is close to overtime. Authorized hours will automatically be added to payroll. Just click “Submit,” and Rippling goes to work, calculating net pay and taxes in a flash. You can sync payroll and expenses to your general ledger, reducing your monthly reconciliation work.

If you’re recruiting globally, Rippling has you sorted: 

• Pay your workers—across different tax jurisdictions and even different currencies—in a single pay run. 
• Include hourly and salaried employees, as well as contractors. 
• Manage your entire workforce, systems, and data around the globe in one place.

10. Support and scale your growing business with Rippling

As your business expands, you’re going to need an HRIS (Human Resource Information System): a software solution that streamlines HR responsibilities like hiring, onboarding employees, running payroll, administering benefits, and more. 

The earlier you begin using an HRIS, the easier it is to scale—especially if you aspire to expand your business globally. And once you reach that point, Rippling can provide all the tools you need to manage your global workforce—in a single system. 

• Hire, pay, and manage your people—whether they’re based in Denver or on the other side of the planet.
• Avoid local, state, and federal compliance infractions with an action plan for each.
• Bring all benefits—health insurance, 401(k), and more—into a single system and automate different processes, like enrolling new employees, updating deductions, and administering COBRA.
• Keep all your recruiting data up to date with ease—from open headcount to new hires—and automate every step of the hiring process. 
• Have a single source of data for HR analytics, policies, and more.

FAQs about setting up a business in Colorado

Do I need a business license in Colorado?

While there isn’t a general business license in Colorado, some professions and industries require licensing. You can check the Colorado Department of Regulatory Agencies (DORA) website to see if your business is regulated. Many counties and municipalities have local business licenses, permits, or tax requirements. Be sure to enquire locally. And if you’re selling tangible goods, you’ll need a sales tax license. 

Do I need a business bank account when launching a business in Colorado?

Depending on the structure of your business (for example, a corporation), you may be required to have a business bank account. That said, having a business bank account and credit card for any kind of business in Colorado is a good idea. Separate accounts keep your personal and business finances separate, make tax prep easier, protect your personal assets, and look more professional. If you plan to hire employees, you’ll need a business account to run payroll. 

Do I need to get business insurance?

Not all businesses require insurance, but most do. If you have employees (part-time, full-time, and family members), you must have workers’ compensation insurance. This covers medical costs and provides financial protection for workers injured on the job. There are additional requirements in the construction industry. 

Businesses with company-owned vehicles must carry liability insurance for bodily injury and property damage. Certain professions (for example, doctors) require professional liability insurance for claims of negligence. 

Every business, including sole proprietors, should carry liability insurance to protect from any claims against business and personal assets. This insurance will also cover the legal costs of defending against such claims. 

What are Colorado’s state payroll taxes?

These are the state payroll taxes in Colorado:

• Colorado Wage Withholding Tax — withheld from employee wages
• Colorado State Unemployment Insurance (SUI) tax — employer contributions
• Regional Occupational Privilege Tax (OPT) — employer/employee contributions where required

You can read more about taxes on the Colorado Department of Revenue site.

Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.