How to start an LLC in Colorado
Learn how to start a limited liability company (LLC) in Colorado with this step-by-step guide.
Learn how to start a limited liability company (LLC) in Colorado with this step-by-step guide.
A limited liability company (LLC) is a business structure in the US that protects its owners from personal responsibility for its debts or liabilities. To start a limited liability company (LLC) in Colorado, you must conduct a business name search, hire a registered agent, write an operating agreement, and file articles of organization with the state.
In addition to the aforementioned steps, there are a number of other things to remember when starting a business in Colorado. You may, for example, want to open a business bank account to separate your business and personal finances, and apply for an Employer Identification Number (EIN) to identify your business with the IRS.
In this step-by-step guide we’ll cover everything you need to do to start your business in Colorado.
LLC business owners can take advantage of several programs and funding made available by the Colorado Office of Economic Development and Industrial Trade. Benefits of starting a limited liability company in Colorado include:
A limited liability company must pay some required fees to register in Colorado. Some of these expenses must be paid to the Secretary of State of Colorado, while others are the responsibility of other state agencies or the federal government. Here is a breakdown of mandatory Colorado LLC fees:
Articles of organization must be filed with the Colorado Secretary of State (Sos) by LLC business owners. When applicants formally form the business, they must pay a one-time filing fee. The Colorado SoS charges $50 for the online filing of the article of organization. Only credit or debit cards are accepted for this fee's payment. Colorado accepts American Express, Mastercard, and Visa.
LLCs must submit an annual report to the Secretary of State in Colorado. The Colorado periodic report filing fee is $10. The report must be submitted within a five-month timeframe, beginning two months before and two months after the creation of the LLC. Colorado's state government imposes a $50 fine for late filing.
Individuals who have an LLC registered in another state and want to expand into Colorado must register the LLC as a foreign LLC in Colorado. The fee to register a foreign LLC in Colorado is $100. A Statement of Foreign Entity Authority is required to register a foreign LLC in Colorado.
Depending on the industry and location, a business may require federal, state, and local permits and licenses to operate in Colorado legally. This is necessary for any business structure. The cost of business permits and licenses depends on the business conducted.
The first and most crucial step in an LLC formation is selecting a company name. Choose a name that conforms with Colorado naming rules and is easily searchable by potential clients. The following are Colorado’s LLC naming guidelines:
Individuals may use the Colorado Business Name Availability Search before requesting a name reservation. The website will also urge applicants to search the Colorado Business Database if the name they choose for their company is already taken. Applicants should provide the name they want to use, eliminating identifiers such as "LLC" to perform the most accurate search.
Whether or not the chosen web domain name is available should be considered when choosing a trade name. It's crucial to have a URL that precisely matches the company name. This action can significantly impact how potential clients discover the company. Searching for the desired URL online using a selected domain registry is the easiest way to find out if it is available.
All LLC naming inquiries and requests are handled by the Business Organizations Division of the Colorado Secretary of State. Business applicants must submit a Statement of Reservation of LLC Name online to reserve a business name. It is possible to reserve an available LLC name for 120 days. Applicants are required to pay a filing fee to reserve a business name.
Every formal business in Colorado is obliged by state law to have a registered agent. All official documents from the State of Colorado are delivered to a registered agent. The agent gets any service or process that might be delivered to a company during a legal proceeding. A registered agent in Colorado is an individual or corporate organization that serves as a company's point of contact for1:
Using a registered agent service ranges between $50 and $300. Any business owner or employee who is at least 18 years old and resides in Colorado may serve as their company's registered agent. Individuals may also elect a member of their LLC or a friend they trust, as long as they match these standards as well.
When forming an LLC, many companies opt to use a registered agent service. Here are some reasons an LLC business might choose a registered agent service:
The Colorado Articles of Organization is the form individuals fill out and file with the state to form an LLC. Colorado only provides an online option for filing the articles of organization. Visit the Colorado secretary of state's website, select the articles of organization form and click on “fill online”. The Colorado SoS charges $50 for the online filing of the articles of organization. The required information to fill in the form is as follows:
Before submitting the form, carefully read it; mistakes could have legal consequences. The information in the document must be in English and include the name and address of at least one person who requested that it be delivered for filing.
To skip handling the paperwork yourself, you may opt to use a service like Nearside or LegalZoom to file your LLC with the state for you.
An operating agreement is a legal document that defines the ownership structure and member roles of a limited liability company (LLC). The operating agreement for a business is regarded as a governing document in Colorado. Setting up a single-member LLC in Colorado does not require business applicants to have an operating agreement. However, even single-member LLCs can benefit from writing up an operating agreement.
Individuals who choose to create an LLC operating agreement can start before, during, or after filing the articles of organization. The operating agreement is not registered with the state; it is held in the LLC's internal business files. Reasons why an LLC should have an operating agreement, include:
1. Include the name of the business, its industry, a description of the services it offers, and the address of its headquarters. Add a statement of the company's purpose, which outlines the objectives it hopes to accomplish.
2. Describe each member's duties and obligations in detail.
3. Determine the Percentages of Ownership.
4. Designate Rights and Compensation Details.
5. Establish guidelines for company management.
6. Define the terms for joining or leaving the LLC.
7. Describe the operational and financial features of the LLC and its tax status.
8. Create Dissolution Terms.
9. Add a Severability Clause.
Operating agreements are essential for future legal challenges since they contain important information regarding business dealings. Therefore, it is usually best to seek advice from business attorneys or the company's registered agent while drafting them. This does not exclude business owners from creating an operating agreement. They can draft an operating agreement that will hold up in court if they take the appropriate precautions and are as detailed as possible.
An Employer Identification Number (EIN) is a unique 9-digit number the Internal Revenue Service (IRS) assigns to a company to identify it easily. Employers use their EINs for annual tax reporting.
Individuals may keep their personal and corporate finances separate by obtaining an EIN. This also allows business owners to protect their private data from identity theft. Having an EIN is frequently required for several crucial business activities, such as:
The IRS accepts direct applications for EINs from businesses and typically issues them immediately. Before starting operations, business organizations must submit a phone, online, fax, or postal application for an EIN. Obtaining an EIN is cost-free.
On the IRS website, business applicants must fill the Form SS-4: Application for Employer Identification Number2. For the IRS to grant an EIN, business owners must provide the following details on the application:
A company must be based in the United States or one of its territories to apply online for an EIN. An EIN is immediately assigned following the validation of the online data. The company to which an EIN is allocated is the only one with that EIN. Even if the first employer goes out of business, the numbers never expire, and the identical set is never assigned to another company.
A business license is a form of license that shows the organization has the authority to operate from the government. Colorado does not issue a general permit for all types of businesses. The kinds of licenses and business permits to apply for depends on the business’s industry and type. Individuals can obtain a business license via mail or online by submitting an application to the appropriate licensing or regulatory authority for their business.
The three primary licensing authorities are state, local, and federal. The sales tax license, often known as a seller's permit, is Colorado's primary state-level business license. Obtaining a sales tax license is necessary if:
For a sales tax license, individuals may visit the Colorado Department of Revenue website. Some industries require the acquisition of particular licenses in addition to the sales tax license. Every company has a unique EIN, which is required to file taxes or make administrative changes to the company. For further information on licenses, visit the Colorado Department of Regulatory Agencies website.
The nature of a company, the sector it operates in, and the location of the company might all affect whether or not it requires a business license. Business owners might also need to apply for federal, local, and even state licenses. There may be several licenses from various sources that your company needs. Individuals must conduct research on their type of business to ensure they complete all licensing and permit requirements.
Colorado does not issue or require a license for a general type of business. State authorities issue licenses for particular business, activity, and profession types. The type of activity your business engages in often determines the license requirements. Benefits of having a business license include:
1. Legal protection: A company must abide by all rules set forth by the city issuing the license to obtain one. A new company's infrastructure, plans, and rules are confirmed by submitting an application for a business license to comply with local laws. Additionally, having a business license shields the owner from being forced to close down for operating an illegal business because most cities legally require businesses to have licenses.
2. Credibility: Customers can be skeptical about new companies, and may want to confirm that a company is authentic before purchasing goods or services, especially online. Customers are more likely to feel secure doing business with an entrepreneur if they can see their business license displayed in their store or on their company website. Business licenses increase legitimacy.
3. Funding: Many cities provide financing to new companies, especially startups. A business must have a license proving that the city has authorized the business to be eligible for funding.
Opening a business bank account is an important step in setting up any business. To confirm the specific paperwork needed, individuals consult their chosen bank’s website. Most banks require the following details:
Individuals should consider various aspects when selecting a bank to open a business account with, including:
The cost to start an LLC (limited liability company) online in Colorado is $50. When filing for the articles of organization, this fee is paid to the Colorado Secretary of State.
You can expect the Colorado Secretary of State's office to process your documents and file your LLC formation within 1-2 weeks.
To maintain an LLC in Colorado, individuals will need to pay an annual fee of $10 along with State business tax at the rate of 4.65% and federal taxes.
Since LLCs are pass-through corporations, their owners will be responsible for paying the profits' 4.63 percent flat tax in Colorado. As opposed to a corporation, the LLC and the owners are treated as one legal entity, preventing double taxation.
You can find Colorado statutory agents online. Registered agents are also known as statutory agents. Nearside offers registered agent services for businesses in Colorado.
Individuals cannot get an LLC for free in Colorado. This is not possible due to the state filing fee. The Colorado Secretary of State charges $50 for filing the certificate of formation.