An LLC is an excellent business structure for small companies with relatively limited income. It can even serve as a helpful way to increase tax options while operating as a sole proprietor. Whatever your reason for creating an LLC, this business structure gives you the flexibility needed to navigate a variety of situations.
In Colorado, the process for forming an LLC is similar to the process in many other states. You’ll need to come up with a name, develop an operating agreement and pay all the applicable fees. As straightforward as that sounds, there are a few areas that can be challenging for those without a background in law or business formation.
To help you set up an LLC in Colorado, we’ve outlined the process for most of the major steps you’ll need to take. Read on through the following sections to learn how to start an LLC in Colorado:
- Choose Your LLC’s Name
- Appoint or Hire a Registered Agent
- Create and File Your Articles of Organization
- Develop an Operating Agreement
- Request an EIN
Choose Your LLC’s Name
One of the first things you need to do when creating an LLC is to choose a name. Any Colorado LLC must include LLC, L.L.C., L.C., LC, Limited liability company, limited or some other form of these terms as part of the name.
In addition to these requirements, the name must be unique. You can use Colorado’s business name database to ensure the availability of your desired company name.
If you have a name in mind but are not ready to file just yet, you can reserve the name. To do so, you need to file a Statement of Reservation of Name. This costs $25 and will reserve the name for up to 120 days.
Appoint or Hire a Registered Agent
A registered agent is a company representative that serves as the official point of contact for a variety of communications. They can be a hired representative who lives in state, an employee of the company, or even a foreign company authorized to do business in Colorado that has a place of business in Colorado. The primary requirement for being a registered agent is to be a regular inhabitant of the state where the LLC is formed.
Beyond the legal requirements for being a registered agent, you should choose a person or business that you trust. A registered agent will receive any legal communications to the company and will need to respond to requests in a timely manner. If you plan to hire a professional registered agent to serve in this position for your Colorado LLC, research them thoroughly before you make the hire.
Create and File Your Articles of Organization
Once you have selected a unique name and appointed a registered agent, it’s time to create your Colorado LLC. To start your LLC in Colorado, you need to file articles of organization with the state. These articles can be found on the official website of the Secretary of State.
Your articles of organization explain your company and how you intend to operate it. Some of the things that need to be included on this submission include:
- Verification that the LLC has at least one member
- The name and address of the individual filing the articles of organization
- Name of the LLC
- Street address of the LLC
- Name and address of the registered agent
- Name and address of the LLC creator
- How the LLC will be run
Filing this report costs $50 and it must be done online.
Develop an Operating Agreement
An operating agreement is not necessary when setting up an LLC in Colorado, but we recommend one anyway. An operating agreement outlines how you will run the LLC. It details the functions of everyone’s job and determines several important responsibilities, such as who will pay the bills, liability concerns, profit sharing and buy/sell agreements.
Operating agreements can also be used to prove that the LLC is a distinct business entity from you as an individual. If you don’t create an operating agreement, Colorado’s LLC laws will govern the way your business operates.
Request an EIN
An EIN (Employer Identification Number) is necessary if your LLC employs more than one person. If you are the only member of your LLC, then you can use your own Social Security number as an EIN. However, for privacy reasons, you can still request an EIN in order to protect your Social Security number.
To obtain an EIN, you need to complete an online application on the IRS websited. It is free to request an EIN.
Ask for Help Forming a Colorado LLC
While you can form an LLC without professional assistance, having experienced professionals by your side can help expedite the process. Not only does this speed up the process from now until your Colorado LLC is created, but also it can help you avoid costly mistakes and set up a more effective operating agreement.
If you’re looking to form a Colorado LLC soon, help is just a click away.
Colorado LLC FAQs
What is an LLC? ✕
An LLC is a limited liability company. This is a business structure that can be easily set up, is more flexible than a corporation, and offers greater liability protection and risk protection when compared to partnerships and sole proprietorships. A major benefit of LLCs is that an owner or member is only liable for what they have invested in the company. Any personal wealth beyond that is not subject to risk should the company fold or fall into legal troubles.
LLCs also act as pass-through entities, which can help during tax season. This means that members of an LLC pay taxes as part of their personal income, similar to partnerships and sole proprietorships. They have the flexibility to be taxed as an S-corporation or a C-corporation, provided they meet the requirements of those designations. Because of the innate tax and liability flexibility of these business structures, they are ideal for small business owners.
Should I form an LLC in Colorado? ✕
Forming an LLC can be extremely beneficial, but it’s not correct for every situation. The LLC business structure works best for smaller companies and sole proprietors who want more tax flexibility, liability protection and privacy. If you already have or eventually plan to have a large company with extremely high revenue, then an LLC may not be the right business structure. However, as you may have guessed, an LLC works well for most small to medium-sized private companies and generally provides better protections against liability than partnerships or sole proprietorships.
How do I know if my LLC name is available? ✕
To check the availability of your desired name, run a name availability search and a business database search. After ensuring the availability of your name, make sure to include LLC or a similar approved abbreviation. All LLCs must include that information within their business title.
How much does it cost to form an LLC in Colorado? ✕
If you live in Colorado, forming an LLC in the state costs $100. Foreign entities have to pay higher fees. Other factors, such as the cost of filing annual reports and hiring a professional registered agent, can also increase the cost of forming an LLC in Colorado.
Do I need an operating agreement for my Colorado LLC? ✕
No, an operating agreement is not mandatory for an LLC in Colorado. However, while it’s optional, we recommend creating an operating agreement. They help draw guidelines for your business operations and can help you avoid legal and personal troubles in the future should any issues with your company arise.
Do I need a business license in Colorado? ✕
Whether or not you need a business license for your LLC will depend on the industry in which you operate. Some industries do not require business licenses, but others do. You should call your local secretary of state office to determine whether or not your industry requires any special licensing.
Are there Colorado business taxes I need to pay? ✕
Colorado charges a flat tax rate of 4.63% on any profit earned during the year. Keep in mind that LLCs can be used as pass-through entities, so you should only be taxed once for the business and have the option of paying the business taxes along with your personal taxes.
Can a foreign LLC do business in Colorado? ✕
Yes. Foreign LLCs can do business in Colorado. Before doing business in the state, the foreign entity must file a Statement of Foreign Entity Authority with the Colorado Secretary of State. This form can be found on the Colorado Secretary of State website under the business documents section.
Can I form a single-member LLC in Colorado? ✕
Yes. A single-member LLC is perfectly acceptable in Colorado. Single-member LLCs notably have the option to use the sole member’s Social Security number as their Employer Identification Number or request an EIN from the IRS if they wish to protect their privacy.
How do I dissolve my LLC when I'm done? ✕
If you no longer wish to operate your Colorado LLC, you can dissolve it by filing a Statement of Dissolution with the secretary of state. It costs $10 to file this document.
Can I be my own registered agent in Colorado? ✕
Yes. The only requirements to being a registered agent are that you are at least 18 years old and have a residential address in the state of Colorado. This is useful for sole proprietorships or LLCs that exist to increase personal tax flexibility.