I am considering suing a Connecticut-based company in small claims
court. I am located in Colorado. Do I have to sue them in a
Connecticut small claims court or can I sue them in a local court?

Hello kkrueger-ga, and thank you for your timely question. 

According to the State of Connecticut Small Claims FAQ:

"9. Can an out-of-state individual or business file a claim in
Connecticut?

Yes, however, the individual or business may be required to attend
court hearings if the defendant contests any of the proceedings or if
the court determines that the business or individual's presence is
necessary."

For more information, you can read the entire FAQ here:
http://www.jud.state.ct.us/faq/smallclaims.html

Here is additional information on making a claim in Connecticut:
http://www.jud.state.ct.us/directory/directory/directions/smallclaims.htm

I hope this helps you in your quest for your missing money. If I can
clarify anything, please let me know before you rate my answer, and
thank you for using Google Answers!
nvwriter-ga

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Clarification of Answer by nvwriter-ga on 14 Jan 2003 11:19 PST

Ah, I missed the Colorado part, sorry. Here is the information on
filing in Colorado, and as I first believed, you must file where the
person does business. From the Colorado Small Claims Handbook:

"If the defendant does not live in, or go to school at a college or
other institute of higher education in the county, you need to go to
the small claims court in the county where he or she does (the
exceptions being landlord/tenant and restrictive covenant claims)."

Here is the entire handbook for your reference:
http://www.ago.state.co.us/consprot/smclaim.htm

Search Strategy used:
"colorado" +"small claims"
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Thank you again,
nvwriter-ga

Just what I wanted. Thank you.

Please note that you do not have to be physically located in a state
in order to be doing business in a state, and thus subject to the
jurisdiction of that state's courts under its "long arm" statute. (A
reference to "the long arm of the law".)

Colorado's long arm statute is reproduced on the website of Sheila K.
Hyatt, a law professor at the University of Denver, at:
http://www.law.du.edu/hyatt/Colorado%20Long%20Arm%20Statute.htm

But if I sue in a Colorado court and lose, can the out of state
company sue me for their travel and legal expenses?

Typically, the only lawsuits that can be brought in relation to past
litigation are "abuse of process" and "malicious prosecution". An
"abuse of process" suit involves  process lawfully obtained, but used
for an abusive purpose. (For example, the defendant may have lied to
the court in order to obtain a court order affecting the plaintiff. A
malicious prosecution case requires that they prevail in the action
you file, then establish that it was frivolous. In some states, after
prevailing in civil litigation, they must also prove "special damages"
- that is, they can only recover if they can prove that they incurred
expenses that would not have ordinarily been incurred in the defense
of a meritorious suit. Such lawsuits are unusual. That's a long way of
saying, probably not.

If the business contests that Colorado has jurisdiction, they would
ordinarily file an objection with the court, stating that the lawsuit
should be filed in a different state. The judge may agree, and toss
out the lawsuit. Even if the judge does not, if the business has no
presence in Colorado it may be difficult to collect a judgment.

Without knowing the facts of the claim, and a bit more about the
defendant, I really can't speak beyond those generalities. (I'm not
trying to avoid giving you a straight answer.)