How To Start An LLC In Colorado 2023: (Full Guide & Resources)
A limited liability company LLC is a common business structure for the majority of entrepreneurs who are looking to start a new company in Colorado. A limited liability company offers personal liability protection to the business owner and helps save a great deal of money in LLC taxes. By following a few steps, you can easily start an LLC in Colorado without the need to hire an attorney.
Unlike sole proprietorships and general partnerships where small business owners are personally held liable for any lawsuits made against their companies, limited liability companies offer numerous advantages as compared to sole proprietorships, general partnerships and corporations because of its management flexibility, ease of administration and plenty of tax options to choose from.
Creating an LLC in Colorado is quite affordable and many people can carry out the process by themselves. Many online business formation companies exist to take you through the formation process and ensure that you encounter no challenges.
This post will discuss how you can form a Colorado LLC with business formation services such as Northwest registered agent and ZenBusiness. Read on to discover how you can create your limited liability company easily and conveniently.
5 Basic Steps to Start an LLC in Colorado 2023
To start an LLC in Colorado takes a few simple steps. With the appropriate documents and information, you can easily form your new LLC. Here are those steps:
Choose your LLC Name
When forming a Colorado LLC, the first step that you should take is to ensure that the name you intend to use is available for use. You need to choose a unique name because no other business entities in Colorado cannot share the same name. Thus, before you make the final decision on your business name, you need to check on the Colorado LLC name’s availability.
Under Colorado law, a legal name of a Colorado LLC has to include the following words and abbreviations at the business name’s end – limited liability company, ltd. liability company, limited liability co, ltd. liability co, limited, L.L.C, LLC or LLC ltd.
The majority of limited liability companies tend to operate by the name that they were registered with the state. If you intend to run several businesses under your company, you will have to register a Doing Business As (DBA) too. The additional name is usually registered with the Colorado Secretary  when you file a Statement of Trade Name of a Reporting Entity as well as paying the $20 state fee.
When carrying out this step, make sure to check with the USPTO (United States Patent and Trademark Office) to determine if there’s another entity registered under that name.
Choose Your Preferred Registered Agent
The second phase when forming a Colorado LLC is identifying your registered agent. To become a Colorado registered agent, you must fulfill the following conditions:
- Be a resident in Colorado or a registered agent service that supports service of process
- Have a physical address (usual place of business)
- Be available in the state during normal business hours
Any individual or business entity that meets these conditions is eligible to be a registered agent. The problem with doing this is that the name and address of the agent become a public record which means that their privacy is compromised. Privacy is highly crucial to several entrepreneurs, especially those who conduct business from home, do business online, or are employed. When you hire a professional service for business formation such as ZenBusiness or Northwest registered agent, you can avoid myriads of telephone calls and emails.
File Colorado LLC Articles of Organization
Articles of organization are legal documents that are used to create an LLC. If you want to file Colorado articles of organization, you can do so via the website of the Colorado secretary. You can get in touch with them at:
Colorado Secretary of State,
Telephone: 303 894 2200,
Email: business @sos.state.co.us
Once you submit your articles of organization to the Colorado Secretary of State, your LLC application will be instantly approved. You should expect to pay around $50 for this service. When filing your articles of organization with the Colorado Secretary of State, you may encounter a few sections that you may be unfamiliar with. These include:
If you wish your company to start today, you should select “Yes” – otherwise you should pick no and choose a date that is less than three months in the future to commence. Some will delay this date if they are not yet ready to open an LLC but would like to get done with the filing processes, especially filing articles of organization.
When filing these documents with the Colorado Secretary of State, the management section often asks if your LLC’s management is member-managed or manager-managed. A member-managed LLc participates actively in the operations of the company. In contrast, a manager-managed LLC is one where the LLC members hire someone to manage the business, in a position similar to that of a CEO in a corporation. Notably, the majority of LLCs are member-managed.
Principal office address
In this section, you’re expected to fill in your city, zip code and the street address of your company’s initial principal office. The address can either be the physical address of the LLC or the address where company records are kept. Here, you cannot use a post office box as your designated office.
Should you opt to use a different address than your designated office from Colorado Secretary, you have to fill in your address in the mailing address section. In this case, a post office box is acceptable.
Create an LLC Operating Agreement for Your Colorado LLC
Once you file articles of organization, it is time to file your LLC operating agreement. An LLC operating agreement is a formal organization form that shows the management structure and the business structure of limited liability companies. It covers aspects such as rights of ownership, responsibilities, and roles of the LLC members, distribution of profits and losses, and the like.
Having a Colorado LLC operating agreement is not mandatory; however, it’s still worth knowing that operating agreements are of great significance to a business. If you don’t operate agreements:
- Your LLC may be subjected to state regulations which could be catastrophic in the event a lawsuit is filed against your company
- The personal liability protection of the business members may diminish
- LLC members may not fully understand their roles and responsibilities if an operating agreement is absent
Read More: Best LLC Formation Services in Colorado 2023
Obtaining an EIN
Also known as the Federal Employer Identification Number (FEIN), the Employer Identification Number (EIN) is a unique tax identification number that is allocated to businesses by the Internal Revenue Service (IRS). This number is identical to the social security number in that it identifies companies for tax reasons. An EIN is used to file federal and state taxes, hire employees, open business bank accounts, collect sales tax, obtain business licenses and permits, and the like.
When you register through the Internal Revenue Service, you will receive your EIN completely free of charge. In addition, the number is immediately shown to use immediately when you finalize the application process on the IRS website .
What Should You Do After Starting Your Colorado LLC?
Choose the federal income taxation for your business
Taxation flexibility is one of the myriads of benefits offered by limited liability companies. When you apply for your EIN, you will have to select how you’d want your entity to be taxed for business income tax reasons. Although there are several limitations, LLCs can classify as a sole proprietorship, partnership, C-corporation, and S-corporation.
A single-member LLC is usually taxed as a sole proprietorship while a multi-member LLC is taxed as a general partnership. However, in both cases, members can elect to be taxed as a C-corporation or an S-corporation.
The difference between corporation taxation and the taxation applied in sole proprietorships and partnerships is that profits and losses are passed on to the income tax returns of the members. The profit balance is distributed among the members and they are not subjected to payroll LLC taxes. Therefore, this could lead to massive savings in federal taxes.
However, you should talk to your financial advisor or accountant before you choose to turn your company into an S-corporation or C-corporation.
Open an LLC business bank account and get a business credit card
It is important to open a business bank account for your Colorado LLC because it separates business assets from the personal assets of the members. You can also pay business debts with it and include it on your business website. To open a bank account for your LLC, you require the following documents:
- A banking resolution – this is an official document to authorize members of a business to open a bank account on behalf of that business
- Driver’s licenses for every member
- Copies of the original business formation documents to prove the formation of that LLC
- Depending on the age of the LLC, you may be required to have a Colorado certificate of good standing to show your LLC is still active and has a good standing with your respective state
Obtain business licenses and permits
Before you commence your business activities, you’ll most likely need several business licenses to register depending on your company’s location and what it does. Here are some of the popular registrations that you’d need:
- Professional service – particular services like accountants, barbershops, salons, and the like have to get this license
- Business license – this is the basic license that is required before a company can begin its operations
- Wage withholding account – if your business intends to hire employees, you will have to register this account with the Colorado Secretary and the Colorado Department of Revenue
- Sales taxes license – you must register with the Department of Revenue  in Colorado before you can start selling certain products and services and collecting sales tax on behalf of Colorado state.
File the annual report
Limited liability companies have to file the annual report with the Colorado Secretary of State. Also known as the periodic report, the annual report shows ownership information, as well as other details and its filing fee, which is $10.
Periodic reports have to be filed for the 3-month period starting from the first day of the LLC formation’s anniversary month. For instance, if your LLC was established on March 1st, the annual report would have to be filed every year between March 1st and July 31st.
The Top 2 Colorado LLC Services
|Name||Zenbusiness||Northwest Registered Agent|
|Full review||Read full review||Read full review|
|Link||Check Price||Check Price|
ZenBusiness is a well-established business formation company and it’s become quite popular due to the minimal paperwork involved. They provides a wide array of LLC services to its clients with the objective of making sure that they have correctly formed their businesses and the right LLC documents have been filled and delivered to the appropriate branch of the government.
It charges a significantly lower amount of money to form a business entity as compared to many key players in the business formation industry. Therefore, it’s safe to say that if you choose ZenBusiness, you’ll get great value for your money.
Northwest Registered Agent
Forming Colorado LLCs takes plenty of time and state-mandated paperwork that needs to be completed. This tends to be confusing to many business owners, especially new owners. Northwest provides business formation services that can aid business owners to identify the right documents, filling them out in time, and filing them with the appropriate government agency.
Besides offering business creation services, Northwest provides plenty of additional services, such as registered agent services. New business owners will find Northwest registered agent services to be quite handy
Read More: Best LLC Services 2023
Starting a limited liability company is quite an exciting move and many owners look forward to it a lot. What’s more, forming an LLC in Colorado is surprisingly simpler as compared to many US states. You can choose to form your LLC by yourself or hire the services of an online business formation service. This whole process can be carried out online, which makes it efficient for business owners.
To avoid encountering any challenges in the LLC formation process, make sure to follow the aforementioned steps. In addition, do your homework to ensure you have all the necessary documents available to form your LLC.
Frequently Asked Questions (FAQs)
It costs around $50 to create an LLC in the state of Colorado
Colorado requires LLC owners to file a periodic report of $10 each year.
Once you’ve submitted your articles of organization to the Colorado Secretary, your LLC application is immediately approved
Any individual can become their own registered agent if they are not less than 18 years old, available during normal business hours to receive legal paperwork, and reside in the Colorado state.
The state of Colorado does not obligate LLCs to have an operating agreement, but having one is crucial. An operating agreement helps to prevent managerial and financial conflicts, provide limited liability protection and personal asset protection as well as make sure that you choose the rules to govern your company rather than the state law which is applied by default.
First of all, it is essential to ensure that the name of your Colorado LLC can be distinguished from the business names of the other businesses in the state. Here, you have to visit the Colorado Secretary of State and search their business name database. You can perform a name search on their site for free just to make sure that your prospective name is available.
A foreign LLC is an LLC that has a presence outside of the location that is what was initially formed. It’s important to have a foreign LLC in every state that you operate in.
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- Business Forms List. State.co.us. Published 2022. Accessed March 3, 2022. https://www.sos.state.co.us/pubs/business/forms_main.html
- Colorado Secretary of State – Business Database Search. State.co.us. Published 2022. Accessed March 3, 2022. https://www.sos.state.co.us/biz/BusinessEntityCriteriaExt.do
Employer ID Numbers | Internal Revenue Service. Irs.gov. Published 2017. Accessed March 3, 2022. https://www.irs.gov/businesses/small-businesses-self-employed/employer-id-numbers
Home | Department of Revenue – Taxation. Colorado.gov. Published 2022. Accessed March 3, 2022. https://tax.colorado.gov/
C.R.S. Title 7 Corporations and Associations. www.sos.state.co.us. Accessed March 3, 2022. https://www.sos.state.co.us/pubs/info_center/laws/Title7/Title7Article90Part6.html#a7-90-601