Starting a business no matter where you are comes with challenges. But starting a business in Colorado can come with unique considerations. Getting compliant with more laws and regulations, dealing with the cost of living and inflation, and competing for top talent are just a few additional challenges that Colorado employers may face.
Securing funding and managing costs is usually the first step and biggest hurdle to starting a business. If you have an idea of what you want to do, conducting appropriate research will help as you pitch your business plan to secure funds. Then there’s hiring the right people to get going. Attracting and retaining qualified employees is key to not only starting your business but growing it.
Luckily, you don’t have to go it alone. To help you learn how to start a business in Colorado and deal with the unique challenges and opportunities of being a Colorado employer, here are nine steps to get your business started right, and a resource to make sure it thrives.
How to Start a Business in Colorado—First, Assess Your Business Idea
- Conduct Market Research: Get your arms and legs around your market, customers, competitors, and suppliers. What’s the health of your industry? How is your target customer spending money right now? Who are your competitors and where are they excelling? Where is the gap in your market? How will you source and deliver your products and services? You can visit the Colorado Chamber of Commerce to get data and insights to fuel your research and planning.
- Write a Business Plan: A business plan outlines your business goals and how you’ll achieve them. It typically includes sections to describe your company, value proposition, market analysis, organization/management, revenue projections and scenarios, products/services, sales, and marketing approach, timelines, and other factors that support the viability of your new business venture. Learn how to write a business plan by visiting the Small Business Association. Or, check out the Service Corps of Retired Executive (SCORE). Both organizations offer free business counseling and assist with drafting business plans.
- Find Funding: Starting a business can incur a lot of expenses. From branding and marketing to retail space and critical equipment/infrastructure. Even if you don’t have much money, there are several ways to fund your business. Consider the following options and see what’s right for you:
- Self-funding
- Venture capitalists or “angel investors”
- Small business loans from local banks
- Crowdfunding online
Then, Establish Your Business In Colorado
- Choose Your Business Structure: The right business structure can bring a lot of value to your company. Some common business structures include Sole Proprietorships, Partnerships, Limited Liability Companies (LLC), Cooperatives, Corporations, and S Corporations. The business structure you choose can influence everything from day-to-day operations to business taxes, so make sure to research the ins and outs of your options. Read the SBA’s Choose a Business Structure to determine what structure is right for your business, or visit the Colorado Chamber to learn more.
- Choose Your Business Name: The fun part! Choosing your business name. Think about a name that fits your brand and your values. Once you’ve come up with a few favorites, visit the Colorado Secretary of State to see if the business name you want is available and not already registered by another entity. Another tip, make sure the social media handles you want are available as well!
Depending on the business structure you select, you may need a DBA (“Doing Business As”) as well. DBA is a fictitious name that’s different from your business entity name and is sometimes necessary to open a business bank account in certain situations. To learn more, check out this article: Understand DBAs and How They May Be Beneficial to Your Small Business.
- Get a FEIN: A what? A federal employer identification number (FIEN). Before you file your business with the State of Colorado, it’s often a good idea to first apply for a federal employer identification number (FEIN), also known as a tax ID or EIN, from the IRS. This number is important for filing federal taxes, hiring employees, or in some cases, opening a business bank account. Not all businesses need a FEIN. You can use your Social Security Number as your Tax ID if you operate as a Sole Proprietorship or LLC with no employees. Learn more: Do I need a Tax ID Number for My Business?
Now what? Get to know what federal taxes you’ll be subject to — and when those taxes are due. What taxes you must pay and how you pay them depends on the type of business you operate. To learn more, visit the IRS’s Business Taxes site to learn about Income Taxes, Estimated Taxes, Self-Employment Taxes, Employment Taxes, Excise Taxes, and more.
- File and Register Your Business in Colorado: You’ll need to register your business and apply for specific IDs and licenses if you’re going to do business in Colorado:
- Register a new business with the Department of Commerce and Consumer Affairs
- Get a Colorado Tax ID and General Excise Tax license
- Apply for a Withholding License/ID with the Department of Taxation
- Get an Unemployment Account Number with the Department of Labor
- Open a Business Bank Account: A business bank account is not required for every business but it’s typically a best practice that will help you separate your personal and business finances and keep your business expenses organized. When shopping around, you’ll want to consider a variety of factors, including type of business bank account (checking, savings, and/or merchant accounts), monthly fees, minimum balance requirements, ATM access, online/mobile banking capabilities, access to loan options, and more. While each bank has different requirements, you’ll typically need articles of incorporation, your EIN or tax ID numbers, business licenses, and other incorporation documents.
- Get Ready to Hire Your First Employee! From here things can get even more complicated. There are many types of workers (e.g. full-time employees, part-time employees, seasonal workers, independent contractors, volunteers, etc.). Generally, when you bring on a new hire, you’ll need to classify them as either an employee (W-2) or an independent contractor (1099). Knowing how to differentiate between the various types is crucial.
Failing to comply with applicable laws can have costly consequences. Employee classifications not only impact methods of employee payment and benefits but impacts tax withholdings and employer taxes too. Misclassifying employees can result in costly fines and back wages for overtime, benefits, and more — luckily Obisidian HR can help with all of that.
We Can Help You Start a Business In Colorado
Starting a business in Colorado can be exciting as well as a bit overwhelming too. That’s where Obsidian HR comes in. We’re local to Colorado and we can handle your payroll, employment taxes, healthcare, workers’ comp, safety programs, HR, and more. We want to make it easier for you to focus on enjoying your business and seeing it grow.
When you choose a partner like Obsidian HR, you don’t just get “human resources services” or some do-it-yourself software. You get an actual team of certified, Colorado HR professionals that know how to help your business succeed.
To learn more about how to start a business in Colorado and where to go from here, download the full guide below. You’ll also learn how to choose a health insurance plan and build the right benefits package, define your culture, and get access to tools to drive efficiencies as you get grow.
