Colorado Business License

Colorado doesn’t issue a general business license, leaving entrepreneurs to navigate a complicated landscape of local, state, and federal requirements.

Whether you’re looking into operating within certain regulated industries or are wondering about sales tax laws, it’s essential that you spend some time in order to understand the distinct rules, regulations, and permits of your business’s niche and location.

This detailed Colorado Business License overview covers the types of licenses and permits you may need in order to operate legally within the state of Colorado.

Do I Need a Business License in Colorado

Colorado doesn’t offer a one-size-fits-all business license.

This means that you may need to obtain a combination of different licenses and permits, all of which will be specific to various factors such as your business type and location.

Type of Business

Below, we’ve detailed common ways in which your Colorado business type can dictate the licenses you’ll be required to obtain, as well as specific examples of these:

• Sales Tax License: If your business sells certain products or services (e.g., personal property, food and drink, or photocopying services) you must obtain a state license from the Colorado Department of Revenue in order to collect sales taxes
• Occupational Licenses: Businesses like veterinarian offices and wholesale drug outlets require specific licenses regulated by the Colorado Department of Regulatory Agencies (DORA)
• Environmental Permits: If your business’s activities could potentially impact the environment, it’ll likely need specific permits from environmental agencies (e.g., the Colorado Department of Public Health & Environment) in order to operate

However, this is not the only factor influencing the exact combination of licenses you’ll need — the location of your business within Colorado plays an important role as well.

Location

In this section, we’ve provided a succinct overview of the potential licenses and permits that your business may need due to local, state, and federal requirements:

• Local: In some Colorado cities or counties, you might need a Home Occupation Permit if you run your business from your home or a Signage Permit if you display any advertising signs. You can usually obtain these permits from your local county clerk’s office or municipal planning department
• State: The CDOR issues the sales tax license businesses need in order to sell certain tangible goods in Colorado. You can apply for this online through CDOR’s website. Additionally, state agencies oversee regulated professions like veterinarians, trust companies, and wholesale drug outlets
• Federal: For businesses in specialized sectors like water utilities or transportation network companies, you may need to adhere to regulations by federal agencies. For instance, transportation network companies may need to follow regulations set by the Federal Motor Carrier Safety Administration

Since the exact permits and licenses your business will need are entirely unique to your situation, you’ll have to conduct thorough research into your own local, state and federal regulations to smoothly launch your business.

Alternatively, many entrepreneurs opt to leverage the expertise of third-party services to handle this on their behalf.

How to Get a Business License in Colorado

In order to get your business license(s) in Colorado, you will need to complete the following steps:

• Form Your Business
• Obtain an Employer Identification Number (EIN)
• Apply for the Required Licenses and Permits

Let’s take a look at each step in more detail below. 

Step 1: Form Your Business

Before setting out to obtain a business license in Colorado, it’s pivotal that you first choose an appropriate structure for your business. Sole proprietorships, general partnerships, and corporations are all common choices, however it’s often seen as the most advantageous for small businesses in Colorado to form as a Limited Liability Company (LLC). There are a few reasons why:

• Limited Liability: Members are protected from personal liability for business debts, safeguarding personal assets. Keep in mind that you will need a separate business bank account for this.
• Tax Benefits: LLCs typically enjoy a pass-through tax treatment, avoiding double taxation that corporations are subjected to. 
• Management Flexibility: LLCs allow for flexibility in management structure, either being member-managed or manager-managed based on the preferences outlined in the certificate of formation.
• Ease of Formation: With the Colorado Secretary of State’s official filing tool providing forms that meet the minimum state law requirements and the option to file online, setting up an LLC is relatively straightforward.

Many small business owners opt to avoid the tricky process of forming an LLC by instead leveraging the help of third-party LLC formation services.

Step 2: Obtain an EIN

The second step you’ll need to complete before applying for your business license and commencing with your business plan is to obtain your EIN. This is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to businesses in the United States so that their financial transactions can be identified and tracked.

An EIN is often necessitated when applying for various permits and licenses as it allows local and state governments to ensure your business is operating within the confines of the law. You can obtain it in a number of ways:

• Online: You can apply for your EIN on the IRS’s official website by using the EIN Assistant. You should be granted your EIN shortly after completing this application
• By Fax/Mail: After completing Form SS-4, you can apply for an EIN by submitting it to the IRS via mail or fax
• By Phone: International applicants and businesses located outside U.S. Territories are required to call the IRS at (267) 941-1099 to obtain their EIN — which they should receive during this call

Note: If you are operating as a sole proprietorship, you will be able to use your Social Security Number (SNN) instead as long as you haven’t hired any employees.

Step 3: Apply for Licenses and Permits

After settling on the appropriate legal structure for your business and initiating the application for your EIN, the next step is to focus on securing the necessary licenses and permits to operate legally within your locale and industry.

• Local Licenses: Visit your local government’s website for information on required local licenses and permits. In addition, local chambers of commerce often provide resources to help you understand what’s needed. Some cities even have online databases where you can look up the licenses you might need based on your business type
• Statewide Licenses: To find out about state licensing, consult the DORA website’s searchable list. You also can review DORA’s list of “Other Licenses & Regulatory Resources.” For a sales tax license, visit the CDOR website for guidelines and an online application
• Federal Licenses: While the federal government doesn’t mandate licenses for general business operations, if your new business falls under any government-regulated category, such as agriculture, fishing, firearms, and alcohol sales, it may be required to obtain additional federal licenses or permits (e.g., liquor license, etc.)

Note: For more detailed information on specific municipalities, visit the Colorado Department of Local Affairs website.

Step 4: Renewal of Licenses and Permits

Many business licenses must be renewed annually. Ultimately, though, this’ll depend on the specific type of license in question as well as the state and/or federal agency with oversight responsibilities. If you’re uncertain whether you need to renew any of your business’s licenses, we recommend reaching out to the agency that issued your business license for clarification.

Alternatively, due to how complicated each step of applying for and renewing business licenses is, third party services that handle this entire process are becoming an increasingly popular option.

How Much is a Business License in Colorado

There’s no standard cost to acquire a business license in Colorado because the city or county in which your business will operate usually determines this. Fees may range from $25 to several hundred dollars. In some places, such as Denver, a general business license costs around $50.

If you own a restaurant in Boulder, for example, you’ll need to obtain a general business license as well as a Boulder Food Establishment License. The latter could cost around $100 annually in addition to other permits (e.g., liquor licenses) that come with their own separate fees.

To accurately determine the licensing and permitting costs for your specific business type and location, you should consult both city and state government websites for fee schedules and — when possible — speak directly with a governmental representative.

Alternatively, you can use a third-party service in order to save time and ensure you don’t accidentally overlook an important license or permit.