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By The Wyoming LLC Attorney Team

May 05, 2023

Colorado LLC Requirements

How to Start an LLC

This article explains what LLCs are and their flexibility compared to corporations. It further elaborates on the requirements for setting up an LLC in Colorado, including the need for a business name, a registered agent, and an operating agreement. It discusses the fees associated with forming an LLC, the benefits it offers, including asset protection, and the importance of understanding taxes. Additionally, the article covers the necessity of filing an periodic report and considerations specific to a single-member LLC.

Whilst an LLC is an ideal structure for someone seeking to create a single-owner business, there is far more flexibility than that available to people who own LLCs. Limited Liability Companies can have a single owner, be a partnership between multiple individuals, or have a multi-member structure as a far larger organization that employs several people in administrative and management roles. Akin to a corporation, there is no limit to the number of members in an LLC, allowing for vastly scalable operations from the LLC. These factors combine to make an LLC more flexible than a corporation, due to the range of sizes in addition to the regulatory background.

What is an LLC?

An LLC, or Limited Liability Company, is a business structure in the United States of America. In these structures, the owners are not personally liable for the debts or liabilities that the company possesses, with these instead falling on the company itself. The concept of an LLC comes from the hybridization of a corporation and a partnership, in which an individual is able to operate a company but has the liability benefits of working as a corporate entity.

Whilst an LLC is an ideal structure for someone seeking to create a single-owner business, there is far more flexibility than that available to people who own LLCs. Limited Liability Companies can have a single owner, be a partnership between multiple individuals, or have a multi-member structure as a far larger organization that employs several people in administrative and management roles. Akin to a corporation, there is no limit to the number of members in an LLC, allowing for vastly scalable operations from the LLC. These factors combine to make an LLC more flexible than a corporation, due to the range of sizes in addition to the regulatory background.

What is required of an LLC in Colorado?

There are several Colorado LLC requirements to take into account when setting up your organization, each of which helps the authorities to establish your company officially and keep track of the liabilities and taxes that each organization is required to pay. Some of the requirements to get started with your registration and Colorado LLC taxes include:

Business name

The first thing to know when registering an LLC in Colorado is the name of the business. There are a few rules on how to name a Colorado LLC, including that there must be the words or abbreviations “LLC, Limited Liability Company, Limited Company” or some other form of an abbreviation that distinguishes the business from other types of companies. When abbreviating the name of the company, you are allowed to abbreviate the word “Limited” to “Ltd.” and “Company” to “Co.”.

In addition to the legal requirements, there are a few other things you might want to consider when choosing a business name. For example, calling your company something along the line of “Colorado Property Holdings LLC” is ideal for a business looking to provide clarity as to the function of the organization, whereas “Luxury Properties Colorado LLC” adds some more interest to the brand. Think about what you want to evoke from the name of your company and some of the benefits of specific pieces of wording, as the better the name of your company, the stronger your foundation will be for future growth. Another important consideration is your privacy. If you are forming the LLC anonymously, you should avoid including personal information like your name, pet’s name, children’s names, address, or birthday in the LLC’s name.

Registered agent

LLCs across America, including those that are based in Colorado, are required to maintain a registered agent. The registered agent is an individual or entity that accepts legal documents and papers on the behalf of the LLC in the event of taking legal action or being on the receiving end of litigation. A registered agent must have a physical address in Colorado and be available to accept mail during business hours. Being an agent means consenting to be a representative of the company and effectively acting as the first point of contact between the organization and the authorities on a range of matters. LLCs have a few options available when choosing a registered agent for the company, including:

An individual with an association with the company that is a full-time resident of Colorado with an address in the state.

A Colorado business entity that has its main place of business in Colorado and trades in the state throughout the year.

An entity from outside Colorado that has the authorization to do business in the state and has a permanent address within Colorado.

There are different benefits to each of the options that people choose, with individuals having more of an association with the company but less experience in dealing with litigation and other legal issues. On the other hand, making use of a business that has the right to work in Colorado means that you have more experience on your side, but you lose the advantage of having someone with an intricate knowledge of the way your company works. This is a fine balancing act, so take time to consider it before you choose either way.

Operating agreement

An operating agreement is not strictly a necessity for an LLC to register in Colorado, but having one is advisable. Operating agreements are incredibly thorough documents that establish the individuals in the company, the roles and responsibilities that each member and manager has along with the rights of everyone involved, with the management structures that the organization uses also being laid out thoroughly in the document. In effect, the operating agreement that you create is the company’s constitution and defines all the systems and governance that are in place. Operating agreements add legitimacy to the LLC in the eyes of the law. If your LLC ends up being taken to court, having a well organized and signed operating agreement can aid in your asset protection.

If you don’t have an operating agreement in place that sets out how the organization works, then the LLC will operate based on the LLC laws that Colorado has in place. Whilst this isn’t necessarily a problem, it means that your organization’s governance is far less bespoke than it could be, which leaves distinct room for improvement in the future.

The goal of many LLCs is to limit the level of liability that both the individual running the company and any other related corporations deal with if there are any litigation issues surrounding an LLC. Implementing an operating agreement proves that the organization is distinct from any parent companies or pre-existing businesses, as there is evidence that it functions in its own way that is not reliant on management or support from any external bodies. Not only does this document support your practical governance in the future, but it supports you in the event of court issues.

Articles of organization

Articles of organization are documents that you send to the authorities to properly register a company, or in this case, an LLC. The specific nature of the articles of organization varies depending on the state that you are working in and comes with a fee that the business has to pay the state, currently being $50. This is a fairly simple administration fee that helps the state to check all of the information and make sure that all of the facts are in order before you launch your LLC.

When writing your articles of organization, make sure that you have all of the necessary information. Missing something important means that the state needs to get back to you, you need to respond and there is a significant delay in the process. The information that you need to provide when writing the articles of association includes:

  • The name of the LLC, so the state knows how to refer to the organization.
  • The LLC’s street address, so there is a simple method of contacting the LLC with any queries.
  • The registered agent’s name and address, so the state has a means of contacting senior officials whenever necessary.
  • The name and address of the organizer (the person forming the LLC), which is potentially the same as that of the registered agent.
  • Whether the LLC will be run by a manager or the members of the LLC.
  • A formal statement that the LLC has at least one member, without the need to disclose the identities of members of the LLC.

If you have written an operating agreement there is no need to supply this to the state, as it is effectively an internal document that defines the governance of the organization rather than a reference document for external parties to examine and compare to the company’s real-world governance techniques.

Business licenses and permits

Depending on the specific type of business you are running, there are a few licenses and permits that you might require before starting to do business. The first of these types of permits are local licenses, which vary depending on the city in which you are operating. Many cities don’t have all of the necessary information on their websites, so an ideal step at this point is to contact the city administrators and ask them specifically whether there is a need for a permit to conduct business in the sector that you work in.

The state of Colorado also has a system of licenses which is thankfully more transparent to someone looking to start a business. They host the majority of the information you need online, and you can still contact their staff with any queries about your company, for example, if you think you might fall under two separate parts of the regulations. Securing a business license means that you can legally conduct business within the state and is a show of confidence for a customer that you work to a high enough standard to receive a license. Some licenses have specific renewal periods, so make sure that yours doesn’t expire without you realizing as this could lead to the state asking you further questions.

Tax forms

At the end of set financial periods, ensure that you complete all of your tax forms for the state. This means accurately keeping track of the income that the company earned, any outgoings, and the amount that the organization paid to any of its employees. When dealing with the corporation taxes Colorado levies, this includes filing a Periodic Report, which is an annual report of the amount of money that the LLC earned over the year prior. This is due within three months of the anniversary of the LLC’s formation and is set this way to make sure that managers deal with round amounts of time such as exact years rather than adapting to the tax year if they formed only a couple of months prior.

Ensure that your accounts are as accurate as possible. An LLC exists to limit the level of liability that the company experiences and any figures that are found to be inaccurate could put undue pressure on the organization. Where possible, look to use financial experts at this stage in the process to get your figures as accurate as you can and reduce the risk of any further investigations taking place and reducing the efficiency of your business over the coming months.

Any other documentation

Some companies have other documentation that they are required to provide depending on their personal circumstances. For example, an LLC that contains more than one person becomes an employer, at which point it requires an IRS Employer Identification Number, or EIN. This is the case even if the organization has no employees, simply members of the LLC. Unlike the fee that you pay when submitting your articles of organization to the state, it is free to get this documentation from the IRS with a quick and easy application that you can complete online. Having this helps the IRS to track who works for what company and the amount of tax that different people might owe on a federal level.

If your LLC changes its governance over time, ensure that you reflect this in your operating agreement. By keeping this document up to date you not only make sure that members of staff and managers in the organization better understand the specifics of their roles, but in the event of litigation you have reduced liability when there is a paper trail pointing out that you have been following best practice from the start of the process.

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Who is an LLC best for?

An LLC can be a very useful business structure for several different people in a range of unique scenarios. These include:

Independent entrepreneurs

Entrepreneurs are people that tend to try to follow their own path in the world of business. This means creating unique business structures and working as individuals to increase the flexibility available to a company. An LLC, especially one managed and run by a single individual, provides the opportunity for this. It also severely reduces the level of risk that an entrepreneur faces, with any liability stemming from poor results falling to the business and not spreading to harm the individual themselves. Intelligent and creative thinkers can create new and innovative products for their customers without fearing the worst if things go wrong.

People protecting their assets

An LLC is a business structure specifically designed to help you to keep yourself protected from liability in the event of litigation or other legal issues. The owner of an LLC doesn’t hold personal responsibility for the debts and liabilities of the LLC itself, which means that if there are any serious issues with the organization. You don’t lose your own personal assets such as your home, vehicles, and cash, instead losing only what you’ve already put into the organization. For someone that isn’t sure whether or not to start in a risky industry, this is an important layer of protection.

People seeking financial efficiency

An LLC is a more financially efficient way of running a company. People have plenty of motivations for running their own companies, including running a business in order to increase their own personal wealth, improve the lives of people in the local community, and have a platform from which to show off their expertise in their industry. You can achieve all of these objectives more effectively by running a more financially efficient organization. Running an LLC means that you have some more flexibility in terms of taxation whilst having reduced costs in comparison to running a full corporation. You save money over time, which adds up to provide your organization with significant investment opportunities in the years that follow. Regardless of your organizational goals, greater financial efficiency is a big step towards achieving them.

Companies seeking compartmentalization

Some companies become too big to reasonably manage in their old structure, requiring something of a rework to start being as efficient as possible again. In these cases, going through with a policy of compartmentalization can be ideal for the business. Compartmentalization means that each individual section of the business falls into its own unique organization, with companies splitting their departments up by state and the specific industry in which they sell products. Using this system means that individual departments can work independently and earn even more money, as they are a more agile arm of the organization thanks to a greater degree of flexibility.

Work with a lawyer to create your LLC

When you’re looking to create your LLC, there are a few things to consider. One of the more important factors is the complexity of all of the documentation that you have to send. There is a lot of information to collate and structure into a few distinct forms and documents when organizing and registering your LLC for the first time, and this can be extremely stressful when you’re running a business on the side. This is where using a lawyer is ideal.

Find the right lawyers with plenty of experience in completing Colorado Limited Liability Company registration and meeting Colorado LLC requirements, as these can offer you detailed advice and guidance throughout the process. The legal industry’s tendency towards reams of paperwork is something perfectly suited to registering an LLC with you, and the high levels of attention to detail that legal teams have means that you won’t miss any deadlines for your paperwork.