He should be able to just pay you under a 1099 as an independent contractor. I don't know why you would have to have an LLC. Sometime, a business owner will require you to have your own insurance as a contractor and/or it makes sense to form an LLC to give you limited liability protection, but that would depend on the type of business you are in. Hope this helps.
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You do need a business name, and part of the name must include LLC, L.L.C or the like.
You don't need a tax id to form the LLC, but you will need a Tax ID afterwards to open bank accounts and file taxes.
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Tax ID numbers are just about always needed, if only for IRS tax compliance reasons. I think your employer's request is more than valid. It's a simple process to get a number, it takes a few minutes usually on the IRS's web site.
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What he is asking for is very common. That is especially the case if he is paying you as a contractor (I will not discuss whether you legally are a contractor, which is a totally separate set of issues). One reason that this is requested is because having an entity is part of the evidence to establish that this is an independent contractor relationship. Fortunately, this is Colorado and forming an LLC is simple and cheap. It can be done rather easily online. Moreover, forming an LLC is a good idea depending on the type of work you are doing for limited liability purposes.
So unless you feel like challenging this frankly basic request, you should select a name and form the LLC. If you want to know if this relationship is really a contractor as opposed to employment, you will have to speak with an attorney on the issues. This is not a slight matter. Good luck.
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He's trying to avoid having to give you a 1099, but what most people don't realize is that having an LLC does NOT absolve him of that liability. It's only if you are a CORPORATION that he does not have to 1099 you.