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Forming a Limited Liability Company (LLC) in Colorado has many benefits for your business. An LLC can give your business tax advantages, management flexibility, and personal asset protection. In Colorado, it’s easy to set up.
Forming an LLC in Colorado only entails three steps: initial information gathering, paperwork, and filing. While creating an LLC differs depending on the state your business resides in. In Colorado, forming an LLC is relatively simple, and the entire process can be completed online.
With this step-by-step guide on forming an LLC in Colorado, your business will be on its way to reaping the legal benefits of being a Limited Liability Company.
Step 1: Choose a Name for Your Company
The first step to forming an LLC in Colorado is to choose your Limited Liability Company name. Your LLC name is your company’s formal, legal name on tax forms and other legal documents.
In Colorado, there are some specific guidelines that your LLC name must include.
LLC Naming Guidelines in Colorado
The name must be distinguishable. For further explanation, this requirement is in the Colorado Corporations and Associations Act, section 7-90-601, CRS.
The name of your business must include an abbreviation or words. Note that the punctuation of these terms is essential, but capitalization is up to your discretion. Here are the specific terms:
- Limited liability company
- Ltd. Liability company
- Limited liability co.
- Ltd. Liability co.
Note that the required terms are different for a professional company LLC. The choice of words and abbreviations are either professional company, P.l.l.c., or Pllc. If you’re forming a professional service company, these terms are only required if your business falls into one of the following professions:
- Physical therapist,
- Professional counselor,
- Psychologist, and
- Social worker.
Once you’ve decided on your business name, you can enter your desired name into the Colorado Name Availability Search to check if it’s available.
If you want, you can reserve your LLC name here while you get all your documents in order.
Step 2: Registered Agent Name
The next step to forming an LLC in Colorado is to select a registered agent. The registered agent is the person or entity that you designate to receive all the legal paperwork for your business. In Colorado, your agent could be you, your business, or a service company, but the registered agent must live in Colorado even if your business resides elsewhere.
A registered agent is mandatory, as they will be responsible for lawsuits, legal documents, garnishments against an employee, government reports, and other compliance documents.
While your registered agent doesn’t necessarily have to be someone in a high position at your company, in Colorado, they must be 18 years or older, have a physical address in Colorado, and consent to the responsibilities demanded as a registered agent.
Step 3: Decide on the Management of Your LLC
After selecting your registered agent, it’s time to determine who will manage your LLC. Your LLC management individual or team will be responsible for making decisions for your business. You can choose to have your business decision-makers be members (owners) or hire one or more managers to manage your daily business decisions.
No matter who you choose to manage your LLC, there must be at least one decision-maker.
If you decide to designate one or more managers to manage your LLC, the members will not make the day-to-day business decisions. However, you can have a member be one of the managers, or the members can elect to hire externally.
Step 4: File Your Articles of Organization
After you’ve decided on your LLC business name, management structure, and registered agent, it’s time to file your article of organization for your LLC. In Colorado, you will file your articles of organization online through the homepage of the Secretary of State website.
You can navigate to their website through a supported browser (Firefox or Chrome) or go directly to the form here.
Information Needed for your Articles of Organization
With the steps above completed, filling out your articles of organization should be straightforward. Here is the specific information you’ll be required to fill out:
- LLC company name,
- Primary business address,
- Registered agent name and address,
- Legal name(s) and addresses of the person or persons forming your LLC,
- Management-managed or member-managed LLC, and
- Any additional information.
The additional information section of the form is optional unless you plan to file a Colorado trademark or need to file a restated constituent filed documents.
In addition, if you wish to delay the date your business operates as an LLC, you can delay the actual operative date up to 90 days. This step is optional and, many times, the reason a company delays their filing date is nearing the end of the year or if they are filing an LLC in multiple states.
Lastly, at this step, to successfully submit your form, you will need to pay the LLC fee. Now that you’ve successfully registered your LLC with the Colorado Secretary of State, you will receive an ID number that’s not to be confused with your business’ tax or Employer Identification Number.
Cost to Start an LLC in Colorado
The only cost your business will encounter to form an LLC in Colorado – not including costs related to operating, preparing, or running your company – is for filing your articles of organization.
The filing fee for submitting your articles of organization is $50. Other costs you may encounter are:
- $25 fee to reserve LLC name
- $150 fee for expedited service for document filing if you file on paper
- $25 fee to amend your articles of organization
- $10 fee in the event of dissolution of your LLC
- $25 fee to amend or restate your articles of organization
- $10 fee periodic report for filing online
- $50 fee for late filing of periodic report
For other fees related to an LLC, navigate here to the Colorado Secretary of State fees per transaction service.
What To Do After Forming Your LLC in Colorado
I filed my LLC in Colorado; now what? Well, first, congratulations! – Here are your next steps.
1. Create an Operating Agreement (optional)
While some states require LLCs to create an operating agreement, Colorado does not; however, it’s in your best interest to have one. This is because an operating agreement outlines your LLC’s players, roles, and rules.
For example, some of the information that you could include in your operating agreement is:
- Purpose of company
- Primary business address
- Registered agent
- Member or manager-managed business
- Financial matters
- Event of dissolution
2. Get an Employer Identification Number (EIN)
An Employer Identification Number (EIN) is used to identify your business by the Internal Revenue Service (IRS). You can obtain your EIN for free through the IRS website here.
You will need an EIN if:
- You have employees
- Your business operates as a corporation or partnership
- You file employment, excise, alcohol, tobacco, or firearms tax returns
- You withhold taxes on income to non-residents
- You have a Keogh plan
You will also need an EIN if your business partakes in any of these organization types:
- Trusts, except certain grantor-owned revocable trusts, IRAs, Exempt Organization Business Income Tax Returns,
- Real estate mortgage investments conduits,
- Non-profit organizations,
- Farmers’ cooperatives,
- Plan administrators.
Your EIN operates like your personal social security number but for your business. It allows you to hire employees, file state and federal taxes, and engage in other legal monetary-related things needed to operate your business.
3. Insurance for Your LLC
You’ll want to make sure you have all the necessary insurance for your LLC for things like liability, fire, auto, glass, business interruption, crime, officer and director liability, and products liability.
It’s essential to protect your business and understand the type of insurance for your LLC; check out the Department of Regulatory Agencies (DORA) guide to small business insurance.
4. Open a Bank Account for Your LLC
After filing your LLC, you will want to tackle the financial side of things. The financial part includes making a financial plan and checking to see if your federal and state tax processes are in order.
Aside from those, one thing you should do is open a bank account for your LLC. It’s essential to separate your business account from your personal one, so your assets aren’t mixed with your business assets.
How to Keep Your LLC Compliant in Colorado
To keep your LLC compliant in Colorado, ensure you have all the necessary licenses needed for your business. For example, if your business is state-regulated, you must apply for a permit through DORA. Other permits you may need for your business are if you deal with liquor, utility, transportation, food, or deal with wholesale products.
Other requirements to keep your LLC compliant in Colorado include
- Filing your periodic report to the Secretary of State each year
- Remain compliant with state and federal minimum wage
- Remain compliant with the Americans with Disabilities Act (ADA), the Equal Employment Opportunity Law, and Occupational Safety and Health Administration (OSHA).
- Maintaining federal, state, and local tax records
- Financial records
- Copies of all business records
Tax Filing Requirements for LLCs in Colorado
If your business files a federal income tax return, you will also need to file a Colorado tax return. In Colorado, the LLC entity often doesn’t pay federal taxes because the members of the LLC do instead.
However, suppose your LLC operates as a corporation. In that case, your business entity will need to file tax returns to the State of Colorado.
Depending on your business, other tax filing requirements you will need to complete are employee tax if you have employees and sales tax if you sell products.
Frequently Asked Questions (FAQs)
There are many factors to consider, from filing with the Secretary of State, maintaining taxes, and opening a bank account when forming an LLC. Luckily, we have some FAQs if you need more information or clarity, so take a look.
How long does it take to register an LLC in Colorado?
If you choose to file your articles of organization online, it is processed immediately after payment. However, if you need to submit a paper document to the Colorado Secretary of State, it takes 7-10 days to process after the department receives your papers.
What tax structure should I choose for an LLC in Colorado?
If your LLC has one owner or member, the IRS considers your LLC a disregarded entity, meaning you report through the 1040 individual income tax return. As a disregarded entity, your self-employment tax is at 15.3%, and half of it is deductible.
If your LLC has two owners or more, your tax structure will look like this:
- File1065 return on partnership income tax form
- Each member will receive a K-1
- Each member pays separate income tax
- Self-employment tax
LLCs with one or more owners or members can also file form 8832 entity classification election. This form is for businesses that want to be treated as a corporation for tax purposes.
Should you hire an LLC formation service in Colorado?
An LLC formation service will complete all the steps of filing your articles of organization with the Secretary of State. If you feel you cannot correctly complete your filing to form an LLC, it may be a good idea to hire an LLC formation service, which will give you peace of mind that all your papers are filed in accordance with the law and stay compliant through the life of the business. Check out our recommendations for the best LLC services to explore some options.
The Last Word
The hardest part about forming an LLC in Colorado is gathering all the necessary information for your articles of organization. However, for the most part, filing an LLC in Colorado is straightforward and a beneficial move for your business and your personal assets.
Hopefully, with this step-by-step guide, you’re on your way to forming an LLC in Colorado.
Filed under: Colorado Business Guides