Did bogus business filings artificially boost Colorado’s economic data? And what should the state do?

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Colorado residents have formed a record number of new businesses this decade, especially after the state reduced the filing fee for new limited liability companies or LLCs.

Colorado residents have formed a record number of new businesses this decade, especially after the state reduced the filing fee for new limited liability companies or LLCs to $1 in the summer of 2022.

About 8 in 10 new business registrations in Colorado, sometimes more, represent LLCs, which are popular because they are easy to set up and offer individuals a shield against personal liability. “This fee relief will keep money in the pockets of small-business owners, many of whom have faced adversity and uncertainty over the last few years,” Secretary of State Jena Griswold said in July 2022before the fiscal year was finished, due in part to thousands of fraudulent filings and registrations by people more interested in securing a name than in establishing a functioning business.

For example, the Colorado Department of Labor and Employment initially estimated employers in the state added 4,800 nonfarm jobs in July, a solid gain. But when theUnlike payroll counts, Lewandowski said business filings were considered a stable indicator that didn’t need revision, aside from rare and minor ones related to timing issues.

Colorado ranked fifth in the country in per capita new business filings, with a 115% gain between December 2022 and December 2023, according to aBut rankings that don’t rely as heavily on business registrations show a less robust picture. A July study from CNBC had Colorado as theLewandowski said studies and rankings of entrepreneurship or business climate typically rely on multiple measures, not just business starts.

New LLC filings plunged in the first half of the year in Colorado, with a 24.2% annual drop in the first quarter followed by an even larger. But in the third quarter, which offers the first year-over-year comparison since the fee holiday expired, the decline was smaller at 6.3%.

 

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