How to Start an ADU or Tiny Home Business in Colorado: By-Right ADUs From 2025-06-30 and State Registration for Sellers and Installers

If you want to learn how to start an ADU builder business in Colorado, start with the rule change that matters most. Beginning June 30, 2025, many Colorado local governments must allow one accessory dwelling unit (ADU) on any lot where a single-unit detached home is allowed, with administrative approval. Factory-built tiny homes also now go through a defined state registration system. Colorado has no general business license, so your business is assembled from a few separate filings, tax accounts, and local permits.

Important: This article is informational, not legal or tax advice. Entity choice, tax treatment, and contract terms depend on your facts. Consult a qualified attorney and a certified public accountant (CPA) before you form your entity, sign customer contracts, or register for taxes.

Materials and Information You Need First

Gather these before you open any filing system:

• A business name that is distinguishable from names already on Secretary of State records. An LLC name must include a designator such as LLC.
• A registered agent with a physical Colorado street address (details in Step 4).
• $50 for Articles of Organization (LLC) or Articles of Incorporation (corporation), plus $25 if you want a name reservation.
• A federal Employer Identification Number (EIN) from the IRS for bank and tax accounts.
• A list of licenses your work needs: local contractor licenses, DORA licenses for electrical or plumbing work, and Division of Housing registration for tiny homes.
• Your target city or county's ADU rules, zoning map, and building department contact.
• A business bank account and a bookkeeping system.
• Insurance quotes for general liability and any coverage your customers or lenders require.

Step 1: Pick the Business Model That Fits Your Work

ADU builder, tiny home seller, and tiny home installer are different roles, and each has a different regulator. Choose your lead model now, because it determines which steps apply to you:

• Site-built ADUs: You work under local zoning, building permits, and local contractor licensing.
• Factory-built tiny home sales: The Division of Housing (DOLA) regulates these units, and sellers register with the state.
• Tiny home installation: Installers register with the Division of Housing.

A tiny home has a statutory definition under C.R.S. 24-32-3301 and following. In general terms, it is built on a chassis, is not self-propelled, and has factory-fabricated services. Read the statute yourself and confirm with the Division whether your unit qualifies, because that answer changes which rules apply.

Step 2: Confirm Your Jurisdiction Allows ADUs Under HB24-1152

House Bill 24-1152 was signed May 13, 2024. Starting June 30, 2025, covered local governments must allow one ADU on any lot where a single-unit detached home is allowed. Covered jurisdictions include:

• Jurisdictions of 1,000 or more people within a metropolitan planning organization (MPO) area
• County parts within census-designated places of 40,000 or more people

In supportive jurisdictions, homeowners associations cannot prohibit ADUs. The act also created a $5,000,000 grant program for pre-approved plans and fee reductions, and $8,000,000 for CHFA ADU lending. Confirm eligibility with the program administrators, since this article does not establish that any particular project qualifies.

By-right does not mean permit-free. Local zoning, utility, and building permit rules still apply. Call the planning office and ask: Is my lot eligible? What size and setback rules apply? What utility connections are required? Which permits and fees apply? Get the answers in writing where you can.

Step 3: Form Your LLC or Corporation

Many small builders choose an LLC because it separates personal and business liability. Colorado's flat state income tax rate is 4.40 percent for individuals and corporations alike, but how it applies differs by entity type, so ask your CPA to compare the options.

1. Search the name. Use the Secretary of State business search at https://www.coloradosos.gov/biz/BusinessEntityCriteriaExt.do. Punctuation and capitalization do not make a name distinguishable, so ABC Inc and abc inc count as the same name.
2. Reserve the name (optional). A reservation costs $25 and lasts 120 days. Details: https://www.coloradosos.gov/pubs/business/FAQs/entityNames.html.
3. File online. Submit Articles of Organization for a Limited Liability Company, or Articles of Incorporation for a Profit Corporation, at https://www.coloradosos.gov/pubs/business/fileAForm.html. The filing fee is $50.

Online filings process in real time, and the record updates right after payment unless the document sets a delayed effective date. Paper-only documents take about 7 to 10 business days. Online filing has no expedited tier.

Step 4: Appoint a Registered Agent That Meets Colorado Rules

Every entity must name one registered agent who has consented to serve. Under rules effective July 1, 2025, an individual agent must be at least 18, hold a current valid Colorado driver's license or state ID card, and either live in Colorado or have a usual place of business there. Enter the agent's name and ID number exactly as they appear on the credential.

If the agent has no Colorado ID, they can request an agent passcode from the Secretary of State. The passcode expires 45 days after issuance. An entity can serve as agent if it is in good standing and has a usual place of business in Colorado. The address must be a physical Colorado street address where documents are received during normal business hours. A P.O. box does not qualify.

Step 5: File a Trade Name if You Will Use a Different Name

If you will market under a name other than your legal name, such as Front Range ADU Works, file a Statement of Trade Name. It is filed statewide with the Secretary of State, not with your county. The fee is $20 online and $5 to renew. See https://www.coloradosos.gov/pubs/business/FAQs/tradeNames.html.

Step 6: Open Your Tax Accounts

Colorado has no general business license, but tax accounts are a separate requirement. Open an account with the Colorado Department of Revenue, Taxation Division, at https://tax.colorado.gov/ if you collect or withhold tax.

• State sales tax: The state rate is 2.9% plus special district taxes. Apply at https://tax.colorado.gov/how-to-apply-for-a-colorado-sales-tax-license if you sell tangible goods, such as a finished tiny home.
• Home-rule cities: Denver, Aurora, Colorado Springs, Boulder, and Fort Collins collect and license their own city sales tax. Your state license does not cover them, so apply with each city directly.
• Services: Services are generally not subject to state sales tax, but installed work and materials can be treated differently depending on the contract. Confirm with the Department of Revenue before you quote.
• Employees: If you hire workers, check with the Colorado Department of Labor and Employment about unemployment insurance, FAMLI premiums, and workers' compensation. This article does not list those rates, so confirm current figures with the agency.

Step 7: Obtain Local Construction Licenses and Permits

Colorado does not license general contractors, roofers, HVAC contractors, handymen, or home inspectors at the state level. Cities and counties do, usually through their building departments. Electricians and plumbers are licensed by DORA. Check your building department's contractor licensing page, and ask whether it requires a separate license for ADU work.

Each ADU project typically needs zoning review, building permits, and utility approvals. Ask the building department for its current review timeline before you promise a customer a start date.

Step 8: Register as a Tiny Home Seller or Installer

The Division of Housing regulates factory-built structures under C.R.S. 24-32-3301 and following. Key requirements:

• Insignia: Factory-built structures sold in Colorado carry a Division insignia. Manufacturers register and post a bond or escrow.
• Seller registration: Sellers of manufactured and tiny homes register with the state.
• Installer registration: Installers register with the state. The fee may not exceed $250 per year, and the registration is valid for one year.
• Certified installers: A certified installer has installed at least five homes according to instructions. Plan your early installs carefully and check the certification path with the Division.
• Local limits: Local governments may not add their own registration, bonding, or contract requirements. They may adopt only unique snow-load, wind, and wildfire standards, so ask the building department which of those apply at your site.

Check with the Division of Housing for current fee schedules and forms before you pay anything.

Step 9: Set Up Insurance, Contracts, and Banking

Keep business money in a separate account. Use a written contract for every ADU or tiny home job that spells out scope, change orders, payment schedule, permit responsibility, and warranty terms. Ask an insurance agent which coverage you need, typically general liability and coverage for property under construction, and have your attorney review the contract language.

Step 10: Calendar Your Recurring Obligations

• Periodic report: $25 each year in your entity's periodic report month, shown on your Secretary of State record. You may file from two months before to two months after that month without penalty. A new LLC or corporation files no periodic report in its first year, so the first one is due in the second year. An entity that does not file becomes Delinquent.
• Installer registration: Renew before the one-year registration expires.
• Sales tax returns: File on the schedule the Department of Revenue assigns to your account.
• Local licenses: Track renewal dates with each city or county where you hold a license or permit.

Common Mistakes to Avoid

• Treating by-right as permit-free. The ADU rule supports administrative approval, but it does not waive zoning, utility, or building permits.
• Assuming your state filings cover Denver or Aurora. Home-rule cities collect their own sales tax and license separately.
• Using a P.O. box as the registered agent address.
• Choosing a name that looks different but is not. Punctuation and capitalization do not count.
• Skipping the sales tax question on finished tiny homes, which are tangible goods.
• Forgetting the periodic report that comes due in your second year.
• Installing a factory-built unit without confirming its Division insignia and your installer registration.
• Designing foundations and anchoring without checking local snow-load, wind, and wildfire standards.
• Assuming a tiny home is a vehicle without checking the statutory definition.

Practical Tips

• Call the planning office before you buy a lot or finalize plans. Ask whether pre-approved plans are an option in your jurisdiction.
• Use the Colorado Small Business Development Center (SBDC) Network at https://sbdc.colorado.gov/ for advising, and the SBA's Colorado district page at https://www.sba.gov/district/colorado for federal resources.
• Keep one compliance calendar covering state, tax, and local dates.

What Results to Expect

Once your filings and registrations are in place, you may be able to take on ADU and tiny home projects in Colorado. Results depend on your market, lot conditions, crew, and local review times, so treat the following as general possibilities, not promises:

• Online entity filings may become active the same day, unless the document sets a delayed effective date.
• Paper-only documents often take about 7 to 10 business days.
• ADU applications in covered jurisdictions may move through administrative review more smoothly, though timing depends on local staffing and how complete your plans are.
• Revenue and profit depend on your pricing, costs, and demand. This article does not estimate them.

Next Steps

Work in this order: entity filing, registered agent, tax accounts, local permit research, and then any state registration for tiny homes. Before you sign your first customer contract, have an attorney review your entity documents and agreements, and have a CPA review your tax setup. Those professionals can address the complex situations this guide cannot cover. To begin the official entity filing process, start at https://www.coloradosos.gov/pubs/business/businessHome.html.