How to Form an LLC In Colorado
LLC business structure in Colorado offers significant advantages to entrepreneurs who want to do business in the state. While this is one of several ways to legally structure your business, it's very popular because it combines flexibility, limited liability and a lack of formalities.
The formation process is straightforward, you have to assign a registered agent, file the articles of organization with the local Secretary of State and get an EIN number. The filing fee is only $50.
This is the bare minimum that gets you a ready-made LLC to start your business in Colorado.
LLC stands for limited liability company, which is a US business entity that can protect the personal assets of a business owner from business debt and lawsuits. Unlike corporations, LLCs are relatively easy to form and maintain and are not subject to double taxation.
1. Choose a Name for Your Colorado LLC
Your LLC must have a name that would be distinguishable from other entity names that are on record. Your business name should not cause any legal issues, so you should stay away from names that seem to copy existing business entities.
Colorado Business Entity Name Lookup
Another option would be checking their Business Database Search. Once you have found a perfect name for your Colorado LLC, it's time to reserve it.
Colorado LLC Name Reservation
You can reserve an available name for 120 days by visiting the Colorado Secretary of State website, filing a Statement of Reservation of a Business Entity Name, and paying a $20 fee.
Your name must contain an approved title indicating that it is a limited liability company.
For example, your name may include one of the following or an appropriate variation:
- Limited liability company
Colorado LLC DBA (Doing Business As) Name
A trade name, known as a "doing business as" or a DBA name, is an alternate name under which your LLC can do business in Colorado.
Trade names are often used when businesses want to operate under a brand name instead of their official LLC business entity name. DBAs or trade names are mainly used for sales and marketing purposes among other things.
You'll need to file a Statement of Trade Name of a Reporting Entity and pay a $20 fee, to get your trade name on file at the Colorado Secretary of State.
TIP: Is the Domain Name Available?
At this point, while you still haven't filed your documents, you can check whether a domain name reflecting your business entity name or your trade name is available for registration. We suggest registering a .COM domain if possible, or a .ORG / .NET domain as an alternative.If all suitable domain names are taken, you still can think of another LLC business name and make sure that the domain name is also available.
2. Appoint a Registered Agent for Your LLC
Your LLC must have a registered agent for service of process in Colorado. This business entity or individual will agree to accept legal papers on your behalf.
They may be a person who is a full-time resident of Colorado or a business entity that has its principal place of business in Colorado.
A foreign entity that is authorized to do business in Colorado can also be asked to perform this function if it has a usual place of business in that state.
Benefits of Using a Registered Agent Service
It might be cheaper in the short-term to do all the filings yourself, but using a registered agent has several advantages:
- Convenience. Using a professional registered agent service is an affordable way to manage all government filings and legal notices for your Colorado LLC.
- Lower risk. This way you can also avoid any fees or further legal trouble caused by missing or misplacing an important document or notice.
- Privacy. If you were thinking of using your home address, but would rather keep it off public records, you can hire a Registered Agent that will allow you to use their address throughout your Articles of Organization.
A registered agent (or a resident agent) is an individual or a business entity that has been designated by the LLC to receive service of process notices, government correspondence, and compliance-related documents on behalf of the LLC. The registered agent must be residing in Colorado.
3. Filing the Articles of Organization in Colorado
You'll need to file Articles of Organization with the Colorado Secretary of State to form your LLC.
The Articles of Organization that is required for Colorado LLC formation should include the following information about your LLC:
- LLC name
- Office location
- The name and address of its registered agent
- A statement that it has at least one member
- Signature of the organizer and registered agent
- Effective date
4. Create an LLC Operating Agreement
Colorado LLC formation does not always involve the creation of an operating agreement. Despite that, you'll usually be advised to prepare one along with your other documents.
The operating agreement can be written to meet the specific needs that your business has in terms of functional and financial decisions. You don't need to file your operating agreement with your Articles of Organization.
However, it must be signed by all the members of your LLC and acts as an official contract that binds all of them to its terms.
An operating agreement is an internal legal document that establishes how your LLC will be run. It sets out the rights and responsibilities of the members and managers, the ownership structure, and operating procedures.
5. Get an Employer Identification Number
An Employer Identification Number (EIN) is required once your LLC has more than one member. Your EIN is used for tax purposes and is required by the IRS. Even if you don't have any employees, you'll still need an EIN if you have two or more members.
If you have employees, you'll need an EIN. If you decide to have your LLC taxed as a corporation, you'll also need an EIN.
You can obtain your EIN from the IRS, by applying for it via their website. The process is straightforward and there's no fee attached.
Without an EIN number you will not be able to:
- file and manage federal and state taxes
- open an LLC business bank account
- obtain business loans
- get a business credit card
- hire employees
EIN stands for Employer Identification Number. EIN is a unique nine-digit number assigned by the IRS to help identify your businesses for tax and filing purposes. An EIN is sometimes referred to as a FEIN (Federal Employer Identification Number) or FTIN (Federal Tax Identification Number).
6. Filing Periodic Reports
Colorado LLC formation provides a framework in which companies in the state can be monitored. You will be required to file a periodic report with the Colorado Secretary of State every year.
This periodic report must be filed via their website and a filing fee of $10 should be paid.
Each company has a unique filing period, which is determined by the date on which the LLC was formed. Every year, you'll have three months from that date, to file your annual periodic report.
You don't have to wait until one year has passed and can choose to file your annual report two months in advance. That means you would be able to file 10 months after your LLC was created.
The Colorado Secretary of State offers an email notification when your periodic report is due and you can sign up for this service for free.