Creating an LLC in Colorado is possible by filing the Articles of Organization with the Secretary of State. It’s also fairly cost-effective as the filing fee and the annual report requirements for Colorado LLCs are fairly affordable.
An LLC, or Limited Liability Company, is a legal structure that protects your personal assets in cases where your business is at risk (like in a lawsuit). It’s also advantageous because it doesn’t require the same focus on formalities as other business structures.
This guide will take you through the basics of how to start an LLC in Colorado. We’ll take a step further and also talk about some steps to complete after you’ve formed your LLC. Here goes!
1. Naming Your Colorado LLC
Your Colorado LLC must have a name that is unique and distinguishable compared to other businesses/entities on record with the Secretary of State. This means the LLC you’re trying to set up shouldn’t have a name same as, or very similar to, a business entity that’s already operating in the state.
A good way to check for name availability is to search the Colorado Secretary of State business name database. The webpage offers several options to refine your search and get better results. It’s also a good idea to search the USPTO website and see if your chosen name has any trademark conflicts.
Designators For Colorado LLCs
Every LLC in Colorado should have a proper designator. The designator identifies the company as an LLC. Accepted designators in Colorado are:
- Limited Liability Company
- Limited Company
- Ltd. Liability Company
- Limited Liability Co.
LLC is the most commonly used designator.
Reserving A Colorado LLC Name (Optional)
You may choose to reserve a name for your Colorado LLC without fully forming the company. To do this, you’ll have to file a Statement of Reservation of Name with the Colorado Secretary of State. The form must be filed online/electronically. Paper forms are not accepted.
Once the Statement of Reservation of Name is accepted, the state will reserve the name for 120 days. The filing fee is $25.
2. Colorado Registered Agent
Every LLC in Colorado must maintain a Registered Agent in the state. This agent is responsible for receiving the service of process on behalf of your LLC. Service of process includes legal documents like lawsuits, subpoenas, summons, etc. The registered agent may also receive general communication for your LLC.
A Registered Agent can be a person or business/entity. Either way, the Registered Agent must have a physical street address in the state. PO Box addresses are not acceptable. Ideally, the agent must be available during normal business hours (9 am to 5 pm) to receive the service of process.
Given these requirements, the following are qualified to act as the registered agent:
- An individual who is a full-time resident of Colorado
- A business/entity that is native to Colorado
- A foreign entity authorized to do business in Colorado and with a place of business in the state
This includes commercial registered agents. This option is very popular with many people due to the convenience and professional handling of the role of a Registered Agent.
3. Filing Articles Of Organization – How To Start An LLC In Colorado
Finding the right name and appointing a registered agent form the preliminary points on how to start an LLC in Colorado. The biggest step is filing the Articles of Organization with the Colorado Secretary of State. A Colorado LLC comes into being the day its Articles of Organization are approved by the Secretary of State.
Colorado requires that the Articles of Organization be filed online. You can complete the form and submit it directly, along with the filing fee of $50. Online payment accepts credit and debit cards. VISA, Mastercard, or American Express cards are accepted.
If you meet all Colorado LLC requirements, you’ll get the approval instantly. Once approved, you can visit the Summary page to save and/or print the approved Colorado Articles of Organization for your LLC.
4. Colorado LLC Operating Agreement
Colorado doesn’t legally require LLCs to have an operating agreement. However, it is highly advisable that you have an agreement in place for your LLC. While it’s extremely important for multi-member LLCs, single-member companies too should get an operating agreement.
This agreement can cover various facets and functional aspects of your business. These include the approach to taxation, hiring policy, the percentage of the LLC owned by each member, roles and responsibilities, and a lot more.
A detailed agreement can also be useful for dispute resolution. In case your LLC finds itself in court, the Operating Agreement might serve as proof for proper operation.
An Operating Agreement is an internal document for your Colorado LLC. You don’t need to file or submit this agreement to any government agency.
5. Get A Federal Tax ID (EIN)
An Employer Identification Number (EIN) is a 9-digit Federal Tax ID. Filing for the tax ID is free and can be done online with the IRS. Remember to apply for the EIN only after your LLC has been approved by the secretary of state.
In case the LLC is owned by another entity or if the person filing the form doesn’t have an SSN, using online submission may not be possible. In these cases, you’ll have to download and fill Form SS-4.
You can submit this form via mail or fax. Submission by mail can take several weeks to process. On the other hand, processing is faster on forms submitted via fax.
Obtaining an EIN is necessary for various functional aspects of your CO LLC. For example, you’ll need this ID to set up a bank account for LLC, hire employees, and build credit with vendors.
6. CO LLC Periodic Report
Every Colorado LLC must file a periodic (annual) report with the Secretary of State. The reports are filed online. The cost of filing this report is $10.
You can file Colorado LLC annual reports for five months. Technically, the report is due for a three month period beginning with the first day of the anniversary month of your LLC. However, you can file the report up to two months in advance. In total, this gives you five months to file the report.
For example, if your LLC was formed in May 2020, the time for the periodic report is May 1, 2021, to July 31, 2021. Since you can file up to two months in advance, you also get March and April to file the annual report.
Do remember that the report must be filed every year. Failure to do so can result in the state administratively suspending or dissolving your LLC.
7. Handling Permits, Licenses, And Taxation
Usually, your Colorado LLC will have to consider three points of administration for requirements of licenses, permits, and taxation. These are:
Specific requirements of permits and licenses can depend on the city/county of your LLC’s operation. The industry of your company may attract additional requirements for permits and licenses as well. You’ll have to consider more about state taxes if your LLC has employees or if the company has to pay sales tax.
For federal taxation, Colorado LLCs get pass through taxation by default. This means the profits/losses of the LLC are reported as part of your personal returns. You may choose to have your LLC taxed as a C-corp or S-corp. This requires forethought and careful tax planning.
Your business will have to file returns and some taxes irrespective of whether it’s making profits or not. Your Colorado LLC must stay compliant. It’s good to have insights into the functioning of your LLC and the specific requirements for licenses, taxation, and permits. However, if you’re unsure, it’s always a good idea to hire a professional to deal with these things.