If you’re thinking of starting your own business, one important decision is what business structure (also called a business entity) to use. A Limited Liability Company (LLC) is a common choice for small businesses in Colorado because it offers some key benefits. In this guide, we’ll walk you through setting up a Colorado LLC, covering everything from choosing a name to filing paperwork with the state of Colorado.
Related: Starting A Business In Colorado Checklist
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Steps To Form A Colorado LLC
Step 1: Select the LLC Name
The first step in forming a Colorado Limited Liability Company is to make sure the name you want is available. A unique name must be selected, as no other LLCs in Colorado can have the same name. So, before finalizing a name, be sure to do a Colorado LLC name search on the state’s online business entity database before registering.
Under Colorado state law, the legal name of a Colorado Limited Liability Company must include one of the following words or abbreviations at the end of the business name:
- Limited Liability Company
- Ltd. Liability Company
- Limited Liability Co.
- Ltd. Liability Co
- Limited
- L.L.C.
- LLC
- Ltd.
Most LLCs will operate under the name they register with the state. If you want to operate multiple businesses under your LLC, a Colorado Trade Name (also called a DBA or “Doing Business As” name) will also need to be registered. This additional name can be registered at any time by filing a Statement of Trade Name of a Reporting Entity online with the Colorado Secretary of State.
If you have an entity name selected but are not quite ready to start the LLC, you can reserve the name for up to 120 days by filing the Statement of Reservation of Name form.
It is also highly recommended to check the United States Patent and Trademark Office (USPTO) to see if this name is registered to someone else. The Colorado Secretary of State will not cross-check the federal trademark database.
Related: How To Do A Trademark Search Before Choosing Your Business Name
Step 2: Appoint a Colorado Registered Agent
The next step in forming an LLC in Colorado is appointing a registered agent.
The requirements to be a Colorado registered agent include the following:
- Either be a Colorado resident or a company such as a registered agent service that accepts service of process. Service of process refers to receiving important legal documents, tax notices, summons, subpoenas, and other legal papers on behalf of the LLC.
- Have a “usual place of business” (commonly known as having a physical address.
- Be available during normal business hours) in the state.
In Colorado, every LLC will need to appoint a registered agent. A registered agent is simply an individual or company with a Colorado street address who is responsible for receiving legal legal documents, such as lawsuit notifications, on behalf of the business.
While many LLC owners opt to fulfill this role themselves, some hire registered agent services to make it easier to keep the LLC adhered to state requirements while offering a layer of convenience and confidentiality since the owner’s personal address isn’t disclosed in public records.
Related: How Do You Appoint A Colorado Registered Agent?
Step 3: File the Colorado Articles of Organization
The paperwork to create an LLC in Colorado is called Articles of Organization. To file them, visit the Colorado Secretary of State’s website.
If you have questions, contact the Colorado Secretary of State.
Colorado Secretary of State
Phone: 303-894-2200
Email: business@sos.state.co.us
Upon submitting the Articles of Organization, the LLC will be approved instantly.
Related: How To Fill Out The Colorado LLC Articles Of Organization
Tips for Filling Out the Colorado LLC Articles of Organization
When filing the Articles of Organization, there may be a few sections that you are unsure how to answer. I’ll help explain some of the ones that bring questions.
Principal office address: In this section, enter the street address, city, and zip code of the initial principal office. This address can be the LLC’s physical address or the address where the business records are stored. You may not use a Post Office Box for the designated office.
If you prefer to use a business address different from the designated office for correspondence from the Secretary of State, enter that address in the mailing address field. A PO Box is acceptable in this section.
Management: The Management section asks whether the management of the LLC is Manager-Managed or Member-Managed.
- Member-Managed LLCs have an active involvement in the day-to-day operations of the business.
- Manager-Managed LLCs refers to an LLC where the members hire somebody to run the company, similar to the position of CEO for a corporation.
Most LLCs are member-managed.
Effective date: If you want the LLC to start on today’s date, choose Yes; otherwise, select No and enter a date less than 90 days in the future to start.
Some will delay the LLC start date if they aren’t ready to go but want the filing out of the way or if they are close to the end of a calendar year and want to delay until the following year so they won’t have to file business taxes.
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What To Do After Setting Up A Colorado LLC
After the registration process is finalized, there are a few additional steps to take. Below is a list of the most common tasks.
Prepare a Colorado LLC Operating Agreement
The LLC operating agreement is a document that governs the LLC’s framework. It covers items like ownership rights, LLC member responsibilities, how profits and losses are distributed, and more.
Most states (including Colorado) do not require an LLC to have an operating agreement, but it is still worth considering. Without an operating agreement:
- The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit.
- Member’s personal liability protection may be diminished.
- Members may not fully understand their roles and responsibilities, leading to costly disputes in the future.
Obtain an EIN
If the LLC will hire employees or is owned by more than one member, an EIN is required.
The EIN or Employer Identification Number (or Federal Employer Identification Number, FEIN, or Federal Tax ID Number) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to an individual’s social security number, the EIN identifies business entities for tax purposes.
Related: How To Register For An EIN
Open an LLC Bank Account
Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.
Several documents will be needed to open a business bank account, such as:
- A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
- Copies of the original formation paperwork from the state showing the official creation of the LLC.
- Government IDs of the member(s).
- Depending on the LLC’s age, a Colorado Certificate of Good Standing may be needed to prove the LLC is active and in good standing with the state.
Apply for Business Licenses and Permits
Depending on what your business does and where it is located, there will likely be various business licenses and permits to register before starting. Some common registrations include:
- Business license: Colorado does not have a general statewide business license, but some cities require businesses to obtain licensing before they can start.
- Professional license: The state of Colorado requires certain types of businesses, such as barbershops, accountants, salons, and others, to be licensed.
- Sales tax license: A Colorado sales tax license from the Colorado Department of Revenue is necessary to sell products and certain services in the state.
- Wage withholding account: Businesses hiring employees will need to register with the Colorado Department of Revenue.
Related: How To Register A Business In Colorado
File the LLC Periodic Report
LLCs must file a periodic report (called an annual report in many states) with the Colorado Secretary of State. The annual filing fee is $10 and is used to update ownership information and other details of the business.
Periodic reports are due during the three-month period, beginning with the first day of the anniversary month of your LLC’s formation. For example, if the LLC were formed on January 12, the report would be due each subsequent year between January 1 and March 31.
Related: How To File A Colorado LLC Periodic Report
Colorado LLC FAQs
How much does a Colorado LLC cost?
The state filing fee to start an LLC in Colorado is $50.
Is there a yearly fee for an LLC in Colorado?
Yes – A $10 Periodic Report (sometimes called an Annual Report) will need to be filed each year.
How long does it take to set up an LLC in Colorado?
The LLC is approved instantly after submitting the Articles of Organization to the Colorado Secretary of State.
What is the difference between a sole proprietorship and an LLC in Colorado?
If you are researching starting a business in Colorado, you may wonder what the difference is between a sole proprietorship and an LLC.
Unlike a sole proprietorship or general partnership where the small business owner can be held personally liable for lawsuits against the business, the LLC is a separate legal structure, protecting the business owner’s personal assets.
Besides liability protection, a Limited Liability Company provides several other benefits over a sole proprietorship, partnership, or corporation because of the multiple tax options, ease of administration, and management flexibility.
Related: Sole proprietorship vs. LLC – What’s right for you?
What is a Foreign Limited Liability Company?
A Colorado foreign limited liability company, officially referred to as a foreign entity authority, is an LLC formed in another state that wants to physically operate in Colorado. Physically operating means having a presence, such as having an office or hiring an employee.
What is a Professional Limited Liability Company?
Businesses that require state licensing can form a Professional Limited Liability Company (sometimes referred to as a Professional LLC or PLLC) instead of an LLC. Some business types, such as dentists, are required to form a PLLC, while others, such as attorneys, physical therapists, and others, have the option of forming a PLLC. Filing for a PLLC is very similar to filing for an LLC.
What is a Colorado Series LLC?
A Series LLC is a special type of Limited Liability Company that is not available in many states but is in Colorado. A Series LLC is like a parent company that can create multiple, smaller “child” businesses under its umbrella. Each of these child businesses is called a series, and they can own assets, make deals, and operate almost like they are separate companies. However, they’re all protected under the parent LLC.
What’s special about them is that if one series gets into financial trouble or faces legal issues, the other series and the parent LLC aren’t affected. This setup allows a business owner to manage different projects or properties separately without needing to create multiple, entirely separate companies. Plus, despite having multiple series, the whole setup is treated as one entity for tax purposes, meaning you only need to file one tax return for the entire Series LLC, simplifying tax reporting.
