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How to Start a Business in Colorado

Julianna Lopez
Julianna Lopez
Business News Daily Contributing Writer
Updated Oct 04, 2022

Are you thinking about starting a business in Colorado? Keep an eye on these challenges and opportunities in the state.

  • Real estate and tech are two of the top growing industries in Colorado and may be the ideal fields in which to start a business in the state.
  • The advantages of starting a business in Colorado include a thriving entrepreneurial community and manageable regulations and taxes.
  • Getting a business license and acquiring legal documents are some of the steps you’ll need to take to start a small business in Colorado.
  • This article is for aspiring small business owners who want to learn how to start a business in Colorado.

To help set up our readers for success, Business News Daily is reporting on the small business environment in every state in the United States. In this installment, we cover the economic and small business environment in Colorado. We even asked a few of Colorado’s 653,000 small business owners about the challenges and opportunities of operating in their state.

Colorado’s overall economy

According to the Small Business Administration’s (SBA) Office of Advocacy, Colorado gained more than 25,000 new jobs in 2021. Overall, about 466,600 jobs opened across the U.S. during that same period. Colorado’s small businesses employ about 1.2 million people, and companies with fewer than 100 employees employ about 600,000 people in the state.

Robust economic activity raises the cost of living, and the price of real estate throughout Colorado has exploded. Colorado is in rapid economic ascension. The major metropolitan areas have experienced unprecedented growth for several years now, creating more economic opportunities for entrepreneurs of all stripes. 

Entrepreneurs in Colorado are excited about the fast-paced economic environment, and they’re largely optimistic about the future of the Centennial State. In communities eager to welcome small businesses and support local entrepreneurs, with disposable incomes riding high, many locals believe obtaining access to capital will only get easier with time.

Colorado’s business world

Colorado ranked 14th on Motley Fool and The Ascent’s 2021 list of the best states in which to start a business, as it’s extremely business-friendly and a thriving hub for growing companies and startups. With the appeal of an outdoor lifestyle and booming economic activity, largely within the tech and cannabis industries, Colorado has become a popular place to relocate.

According to U.S. Census Bureau estimates, Colorado’s population grew by almost 783,000 from 2010 to 2021, reaching a total of about 5.8 million people. Of that group, many are young entrepreneurs, and small business owners in Colorado report no shortage of startups in the area. 

“Here in Boulder, it’s a very entrepreneurial community, for sure,” said Tim Segraves, co-founder of real estate analytics company Revaluate. “Tech startups, natural food startups, biotech, aerospace – it runs the gamut in terms of people starting different businesses. You just walk down the main street downtown and you bump into founders of other companies, or you hear people talking about raising money.”

Did you know?Did you know?: Colorado is one of the states where it’s legal to partake in the growing cannabis industry.

Top industries for small business in Colorado

The regulatory framework and business environment in Colorado provide great opportunities if you’re looking to start a small company in the state. Here are some industries and business types would-be entrepreneurs should consider.

1. Real estate and property management

As Colorado’s population continues to grow, people need more places to live. Owning properties under a limited liability company (LLC) and renting them to families can be a great way to earn a monthly income. 

Starting a property management company is another way to tap into the growing real estate market. Managing apartments, single-family homes and vacation rentals for owners can earn you a portion of their monthly rental income. To start a property management business in Colorado, you’ll need to obtain a real estate license.

2. Technology

According to a CompTIA report, about 1,100 new tech businesses were started in Colorado in 2021. The report estimates that the tech sector’s impact on the state economy is $48.2 billion. 

Software and web development, programming, quality assurance, and data and computer science are among the most popular fields within the tech industry. Tapping into this market can lead to plentiful opportunities for profits, especially as advanced digital tools and platforms increase in popularity.

3. Gyms and fitness centers

With Colorado being full of active communities, fitness centers are in high demand. Gyms and related health services have seen a major boom over the past couple of years. If you decide to start a gym or fitness center, consider choosing a location in a highly populated area. People often enjoy the convenience of not traveling far to the gym, especially if they’re going after work.

4. Digital marketing, copywriting and advertising

Colorado has an array of businesses and companies operating at small-scale margins. While large companies and corporations have expansive marketing budgets, midsize and small businesses need marketing – including copywriting, one of the most sought-after marketing services – at affordable prices. There’s a wide market for advertising agencies as well. You can help other small businesses in the area by starting your own company that offers these services.

Advantages of starting a small business in Colorado

Here are three advantages of doing business in Colorado compared with other states.

1. Collaborative and supportive communities

An active community of entrepreneurs means business owners operate in a supportive environment. Small business owners based in Colorado told Business News Daily that there’s a palpable sense that everyone wants you to succeed – even your competitors – and networking is incredibly easy. Local support is unmatched, they said, and the municipal and state governments do their best to help entrepreneurs excel and stay in Colorado. 

“The amount of interest and interpersonal support is so high,” said Steven Sashen, owner of Xero Shoes. “There are a lot of companies that have come out of basements and become giant companies. It’s a very conducive environment in terms of assistance from the city or state as well.” 

Entrepreneurs have access to a rich community of accelerators, development centers, state programs and co-working spaces to boost businesses in their early stages. These institutions provide vital networking opportunities, as well as the chance to gain critical insights from mentors and forge connections with potential investors. 

“I think the main reason I really like to have my business here is that it’s just a great place for small business,” said Niki Lopez, founder of Focus Marketing + PR. “There’s a lot of support for entrepreneurs as far as associations and networking events. I feel lucky that I started my company here and met so many great entrepreneurs.”

2. Manageable regulations and taxes

Most of the entrepreneurs we spoke to didn’t bring up regulations when we asked about the challenges of doing business in Colorado. That’s because state and local government actions haven’t hurt them. In fact, many spoke fondly of public efforts to foster a healthy environment for startups and small businesses. 

“The regulations and taxations are manageable,” said Robert Thompson, founder and former CEO of restaurant and entertainment chain Punch Bowl Social. “We don’t feel like it’s a hindrance in any way. The city of Denver and the municipalities are great to work with.”

3. Natural beauty and outdoor lifestyle

Small business owners said an ancillary benefit of doing business in Colorado is living in a state that takes great pride in its natural beauty, from the Rocky Mountains and canyon depths to the Colorado River and sterling lakes. Living among pristine natural landscapes is not only a great aesthetic benefit, entrepreneurs said; it also helps attract talented employees from all over the U.S. who are seeking an opportunity to enjoy the great outdoors. 

“Colorado is very active in general; there’s always so much to do,” said Alexandra Weissner, co-founder of social fitness group bRUNch Running. “The community here is so active that we’re able to continue doing what we do. We’re selling out events, and there’s tons of options – there’s an event for everyone every single weekend.” 

The state encourages entrepreneurs to take advantage of the business opportunities offered by the robust sporting and outdoor environment. As one business owner said, the state even works to “export the brand of Colorado” to the rest of the country, and an integral part of that brand is the natural environment and the active lifestyle it promotes. 

“The state started a new program called CO Active Colorado, which is a new division of the state specifically designed to cater to outdoor activity companies in Colorado,” said Lanny Goldwasser, founder of Phunkshun Wear. “That’s very new, but they’re having more and more meetings, and the structure is definitely getting there to where it will be beneficial.”

Disadvantages of starting a small business in Colorado

While there are several pros to starting a small business in Colorado, there are some downsides to consider as well. Here are some of the possible cons of opening a business in the state.

1. Rising cost of living

As a byproduct of the state’s economic growth, the cost of living in Colorado is increasing, making it more expensive to hire and retain employees. However, business is doing well enough that most entrepreneurs find the shift manageable. They said it’s simply the other side of the coin when you have a burgeoning economy. 

“The biggest obstacle we’ve experienced is that the costs involved were significantly more than we had budgeted for,” said Jamie Gulden, co-founder of Feisty Spirits Distillery. “That can always set you back a little bit. It’s getting much more expensive to live in the state, especially in our area, so the cost to hire people at a reasonable rate goes up.” 

Several entrepreneurs reported that they haven’t yet felt the impact of the rising cost of living. Those who can’t afford to increase salaries in anticipation of it – like PJ Hoberman, who co-founded the event planning company Two Parts – said they’re happy to supplement wages and salaries with benefits such as unlimited paid time off (PTO) and flexible hours. 

“As far as rising costs, it hasn’t been too big a struggle just yet,” Hoberman said. “We don’t have the funds to pay everyone a crazy salary, but we try to make up for it with some awesome benefits. We do unlimited PTO, for example. There’s no accrual; the basic policy is, ‘Get your work done, and then go have fun.’ As long as it doesn’t affect your work, then take the time off.”

2. High demand for commercial space

Another consequence of the economy churning at such a clip is the rising cost of real estate, both residential and commercial. For example, thanks to the boom in legal cannabis operations, warehouse space is virtually impossible to find, according to local business owners. The result is that many entrepreneurs are moving their companies to the suburbs or to slightly less desirable areas to keep costs down. 

“The biggest challenge in Boulder was finding commercial space,” Sashen said. “Boulder and much of Colorado has restrictions on growth, so with more people moving in and more businesses starting, there’s only so many places you can put them.”

3. Difficulty in finding startup capital

Colorado is no different from many other states when it comes to finding startup funding. Banks are still relatively hesitant to lend, and many entrepreneurs report low levels of venture capitalist (VC) activity and some difficulty in obtaining traditional financing through a bank. [Learn about small business financing options that bypass traditional banks.] 

“Raising enough money was the most challenging thing,” said Jason Stengl, co-founder of Cannonball Creek Brewing Co. “We did it in the form of an SBA loan, partially, and then just used private investors. It was very challenging to convince the banks and SBA to lend us the money, but we managed to get it done.” 

Did you know?Did you know?: SBA loans are among the many types of business loans that can help you start and grow a small business. See our roundup of the best business loans for alternatives to consider, and learn how to choose the right business loan for your proposed company.

Segraves said that because Colorado’s growth is more recent, investors have yet to catch on in large numbers. Also, because there are so many startups and small businesses in the state, it can be difficult to stand out from the crowd when you’re looking for that much-needed capital. 

“If you’re a tech startup, per capita there’s a whole lot less VC money here in the Front Range as compared to Silicon Valley or even New York,” Segraves said. “That’s definitely been a little bit of a challenge, trying to look outside the box.” 

But some Colorado entrepreneurs, like author and cannabis industry consultant Todd Mitchem, are optimistic that things will get easier. 

“I think when people hear what a stable startup environment Colorado is, more investors will come in,” Mitchem said.

FAQs on starting a small business in Colorado 

Here are some of the most common questions about starting a small business in Colorado.

How much does it cost to set up an LLC in Colorado? 

You’ll face various expenses when setting up an LLC in Colorado. For example, you need to file articles of organization with the secretary of state, and they cost $50 to process. Also, while most people can form an LLC without professional help, many choose to hire an expert, like a lawyer, to ensure nothing slips through the cracks. 

Is a business license required in Colorado?

Most businesses need a combination of licenses and permits from both federal and state agencies, depending on the specific industry and geographic location. Learn more in our guide to getting a business license

Where should I start when opening a business in Colorado?

There are various things to consider when you’re opening your own business in Colorado, including tax registration, local permits, incorporation filing, employer requirements and insurance requirements.

  • Tax registration: When starting your own business in Colorado, you’ll have to register for taxes related to your business’s services. Common taxes for companies in Colorado include the wage withholding tax and the sales-and-use tax. Depending on the services your business provides, you may have to pay the liquor excise tax, cigarette and tobacco tax, severance tax and/or fuel excise tax.
  • Local permits: Your city or county government may require you to register for specific permits and licenses. Each municipality has its own regulations. Some of the most common licenses and permits you may need are alarm permits, building permits, business licenses and/or tax permits, health permits, occupational permits, signage permits and zoning permits.
  • Incorporation filing: Corporations, nonprofits, LLCs and partnerships must register with Colorado’s secretary of state, which you can do online by filling out a form. Sole proprietorships don’t need to register with the secretary of state, since all profits from these businesses are the owner’s income. However, this makes the owner liable for the business’s debts, and the owner’s personal name is used as the business’s name.
  • Withholding tax: Following the filing process of the fourth quarter of the current year, business owners should maintain employment tax records for at least four years. Those records should include the employer identification number, employee information, copies of tax withholding allowance certificates and pension payment data.
  • Insurance requirements: If you hire employees for your business, you’ll need to pay unemployment tax and workers’ compensation tax, which aids in-state workers who have been injured or fallen ill in a work-related setting. Colorado’s unemployment insurance tax provides financial aid to individuals who are capable of working but unable to find a job.

Key TakeawayKey takeaway: Registering for taxes, obtaining local permits and getting a business license are among the to-dos when you start a business in Colorado.

Resources for small business owners in Colorado

If you’re a prospective small business owner in Colorado looking for resources to help you move forward, here are a few organizations to keep in mind. 

  • Colorado SCORE: SCORE’s volunteer business professionals and expert mentors provide counsel and guidance to entrepreneurs looking to start or expand their businesses. The services are entirely free and volunteer-driven. They can help connect you with virtually any other resources you might need. Colorado chapters include Colorado Springs SCORE and Denver SCORE. 
  • Boomtown Accelerators: Boomtown has a 12-week accelerator program that has helped launch dozens of startups and build the foundation they need to succeed. Based in Boulder, Boomtown offers access to a legion of mentors with a wide variety of experience to help businesses grow.
  • Techstars: Techstars is a nationwide accelerator with its flagship division based in Boulder. It offers a three-month, mentor-driven accelerator program in the technology industry and boasts a network of more than 400 companies.
  • SBA district offices: The SBA offers financing and grants, as well as consultations and counseling services. There are also opportunities to apply through the SBA for federal government contracts and assistance after natural disasters.
  • Colorado Small Business Development Centers (SBDC): Colorado hosts more than a dozen development centers for small businesses. Each is dedicated to supporting the development and retention of small businesses by helping entrepreneurs craft business plans, navigate the state’s tax code and more. Check out the Colorado SBDC Network’s website to find your region’s Small Business Development Center. 

Getting off to a good start

With its growing economy and abundant opportunities to tap into expanding industries, Colorado can be a great state in which to start your business. Adequately preparing for your new venture can help set you up for success. Taking the necessary steps to establish your business now will give it the proper foundation to excel in the future.

Shayna Waltower and Adam Uzialko contributed to the reporting and writing in this article. Some source interviews were conducted for a previous version of this article.

Image Credit:

Prostock-Studio / Getty Images

Julianna Lopez
Julianna Lopez
Business News Daily Contributing Writer
Julianna Lopez is a freelance writer, editor, and social media marketer. She loves all things New York, books, movies and theater.