Top Considerations When Starting a Business in Colorado

Starting your own business is exciting—but it can also be overwhelming. From legal paperwork to taxes and licenses, there’s a lot to think about. Taking care of these things early on can help your business run smoothly and avoid trouble down the road.

Whether you're launching a side hustle or a full-time venture, here are the top legal and practical considerations when starting a business in Colorado:

1. Choose the Right Business Structure

The first big decision is how to legally set up your business. Most small businesses choose a Limited Liability Company (LLC) because it’s simple, flexible, and protects your personal assets. Other options include sole proprietorships, corporations, and partnerships. Each structure has pros and cons, so it’s worth talking to a lawyer or accountant to find the right fit.

2. Register with the Colorado Secretary of State

If you form an LLC, corporation, or partnership, you must file formation documents online with the Colorado Secretary of State. It’s a quick process, but accuracy matters. After that, you’ll need to file a periodic report each year to keep your business in good standing. For an LLC, you will need to file the Articles of Organization. Typically, a Manager-Managed structure is recommended when filing out the Articles.

3. Get an EIN from the IRS

Your Employer Identification Number (EIN) is like a Social Security number for your business. You’ll need it to open a bank account, file taxes, and hire employees. It’s free to apply on the IRS website, and even single-member LLCs usually benefit from having one.

4. Understand Local Licensing and Zoning Rules

Check to see if your business needs a local license or permit, especially if you’re running a food business, daycare, or storefront. Also, make sure your business location is zoned for your type of work—even if you’re working from home.

5. Create an Operating Agreement or Bylaws

An Operating Agreement outlines how your LLC will run—how decisions are made, how money is handled, and what happens if an owner leaves. If you have a corporation, you’ll need corporate bylaws instead. Even if you're a solo owner, having this document helps protect your limited liability status and shows that you're treating the business as its own entity. It will also be required when opening the Company's bank account.

6. Open a Business Bank Account

Keep your personal and business finances separate. This protects your personal assets, makes tax time easier, and shows the IRS (and courts) that your business is legit.

7. Get Business Insurance

Forming an LLC helps protect your personal assets, but it doesn’t cover everything. Certain businesses need general liability insurance, but it depends on your industry. You may also want professional liability, property, or workers’ comp insurance depending on your industry and if you hire help.

8. Know the Rules for Hiring Help

If you bring on employees or contractors, be sure to follow Colorado employment laws. That means correct worker classification, fair pay, and proper onboarding. You'll also need to register with the Colorado Department of Labor and set up payroll taxes if hiring W-2 employees.

9. Understand Your Tax Obligations

In addition to federal taxes, your business may owe Colorado state and local taxes. If you sell goods or certain services, you may need a Sales Tax License. Sales tax can get complicated—especially if you sell online or across different locations—so don’t be afraid to ask a tax pro for help.

10. Use Written Contracts

Verbal agreements can lead to misunderstandings or legal disputes. It’s always best to put it in writing—whether it’s with customers, vendors, partners, or contractors. A solid contract protects everyone, sets clear expectations, and gives you a fallback if things go sideways.

11. Protect Your Name, Brand, and Creations

Before you fall in love with a business name or logo, make sure no one else is already using it. You can search Colorado’s business name database and even look into federal trademark protection. If you create original content, designs, or products, you might want to look into copyright or patent protections too.

12. Plan Ahead for the Long-Term

No one wants to think about leaving their business when they’re just getting started—but having an exit or succession plan is smart. Whether you're planning to sell someday, pass the business to family, or wind it down, clear planning can make a huge difference later on.

Getting your business off the ground the right way can give you peace of mind and help you grow with confidence. At Auxo Law, we help Colorado small business owners with the legal side of launching, running, and protecting their businesses—without the confusion or stress.