Form LLC in Colorado: Everything You Need to Know
To form an LLC in Colorado, you must choose a name which is registered with the Colorado Secretary of State, write your articles of organization, and more.6 min read
2. Write Your Articles of Organization
3. Assign a Registered Agent
4. Write Your Operating Agreement
5. Figure Out Your Tax Status
6. Check with Your County Clerk Regarding Licenses or Permits
7. File an Annual Report
8. Foreign LLC
9. Why form an LLC?
To form an LLC in Colorado, you must first choose a name for your company. The name must contain one of the following abbreviations or terms: "LLC", "L.L.C., "Limited", "Ltd.", "Limited Liability Company," "Ltd. Liability Company," "Limited Liability Co.", or “Ltd. Liability Co.”. The point is, your company name needs to reflect that you are a limited liability company by containing abbreviations or words that identify it as a limited liability company.
Finding a Name for Your LLC in Colorado
All registered businesses already in existence in the State of Colorado are on file with the Colorado Secretary of State. You cannot have the same name as another LLC already in existence or otherwise registered in Colorado. So, to see if your chosen name is available, you can check with the Colorado Secretary of State business name database. Some names that include special words like “bank,” or have licensed individuals like doctors may also require additional paperwork. Words that will confuse your LLC with federal or state agencies, such as “FBI” or “Treasury” are also not allowed. The database will guide you as to what the specific requirements for your individual name will be.
Just because a name is available does not mean, however, that you may be able to use it for all purposes. For example, if the company intends to use its name as a trademark, tradename or domain name, you should consider running a trademark search to see if the name, or similar name, is registered by another business, to make sure use would not infringe on another company’s intellectual property rights.
If you find a name that fits your business, you can reserve the name for up to 120 days without taking any further steps to register your business. This is done by filing the Statement of Reservation of Name form provided by the Secretary of State and paying the $25 filing fee.
Once a name is selected, it’s a good idea to see if there is a domain name that reflects your business name in order to set up a strong online presence.
Write Your Articles of Organization
To form an LLC in Colorado, you must create Articles of Organization and file these with the Colorado Secretary of State. While Articles of Organization vary from business to business, they must include the complete name of your LLC, the address where you are doing business, all contact information for the registered agent, the name, address and phone number of the individual forming the LLC, and information declaring if the LLC is being run by members or a manager.
The principal office address is very often people’s home addresses, particularly when they are in the initial stages of forming a business. Under the Articles of Organization, you will also need to declare if the LLC is being member-managed or manager-managed. This can be the most confusing part for new business owners. Member-managed LLC’s are the most common option. This is when all the members (or just you, if you are the only member) will actively participate in the management and operations of the business. A manager-managed LLC is less common, and usually occurs when owners are only investors giving financial support, rather than being involved in running the day-to-day business. Determine which structure your LLC will have, and include this in the articles.
If you want, you can have a delayed effective date, which means the LLC will not come into existence right away. This is not very common, but might be good in the event you are in a transition, such as a divorce, or are still in the midst of gathering finances.
Colorado requires that you file the articles of organization for a new LLC online. The fee for filing the articles is $50. These articles are processed immediately, and may take between seven to ten business days to have a decision made. You can opt to have an expedited service, where you will receive a decision within three business days.
Assign a Registered Agent
Your LLC in Colorado needs to have a person who will accept service of process within the state, called a registered agent. This is a person or business that is agreeing to accept all legal papers that are sent to your business in the event that you are sued. You can assign a person who is a full-time resident in the State of Colorado, or a corporation that has been authorized to transact business in Colorado. You can be your own agent to your company, but keep in mind that this means you will accept service from process servers in the event you are sued. If you have family, children, or serve clients and customers in your home, think carefully before agreeing to be served at your home. To that end, if you decide to choose another individual, you will need to make sure that the entity you assign as the registered agent is willing to serve in this capacity. You can hire companies to be a registered agent, which is a common method for business owners.
Write Your Operating Agreement
You don't have to write an operating agreement if you are forming an LLC in Colorado, but it helps and is highly recommended if there is more than one member of the LLC. This is a document used internally that identifies the structure of your LLC, normally identifying how decisions are made, voting powers, rights, percentage of ownership, distribution of profits and losses, what happens if someone wants to sell or otherwise leave the LLC, dissolution of the LLC . It is basically the guidebook to operating your LLC. Keep in mind that a good business owner will refer to this and update it often, to reflect the realities of running a successful business. You do not need to submit this document to the state, but you should keep copies of this agreement at your business’s registered address.
You do not have to publish any notifications in local newspapers regarding the formation of your LLC in Colorado.
Figure Out Your Tax Status
When your LLC has more than one member, you will need to get an Employer Identification Number from the IRS. It doesn't matter if you have any employees - you can still have your LLC taxed as a corporation. However, you will need an EIN instead of using your own social security number. To get an EIN, apply with the IRS. You will not have to pay to get an EIN. Getting an EIN will also enable you to open a business bank account for the company, which is highly recommended. Even if you are a single member LLC, it may be a good idea to get an EIN so you do not have to give out your social security number to other companies you do business with.
If you have employees, are selling a product, or you are collecting sales tax as part of doing business, you will need to set up correctly with the Department of Revenue. You might also need to register for unemployment insurance tax, as well as other insurances. Check with your local county or Chamber of Commerce to determine what is required of you in the event you hire employees.
Check with Your County Clerk Regarding Licenses or Permits
You may need to get specific licenses or permits, depending on the nature of your business. Check with the county clerk's office in the county or the local Chamber of Commerce where you are doing business to find out what you need to set up your LLC.
File an Annual Report
Every LLC in Colorado is responsible for filing an annual report with the Colorado Secretary of State. Colorado only allows annual reports to be filed online, and the fee to file is $10. These reports are due during the three month period beginning on the first day of the anniversary month when the LLC was formed. So, if you formed an LLC on February 12, your report would be due every year thereafter between February 1 and April 30. You can file the report up to two months early, if that helps your operations, and you can sign up for an email notification from the Secretary of State to remind you when it’s due.
If an LLC is organized outside of Colorado, but wants to do business in the state, it must register with the Colorado Secretary of State and appoint a registered agent, physically present in Colorado, for service of process. To register, the foreign LLC must file a Statement of Foreign Entity Authority online, and pay the $100 filing fee.
Why form an LLC?
LLC’s are attractive structures that offer good tax benefits and protection from liability that other structures like sole proprietorships and partnerships cannot offer. In the event the LLC fails or is sued, your personal assets will be protected. You also get multiple tax options - you can be taxed as a C corporation, a partnership, an S corporation, or a sole proprietorship. In addition, in Colorado, it’s easy to form an LLC: it is inexpensive (only $50), quick, as it can be done online in a few minutes, and you only need a business name and address to form one. There are fewer paperwork requirements in Colorado than for other business structures, like corporations.
However, it is always a good idea to have a licensed attorney guide you and go over all the paperwork before filing an LLC to ensure it is done correctly. The skilled attorneys on UpCounsel will be happy to assist you in this endeavour.