In the past year, Colorado had a record year for new business filings. There are many advantages and considerations when launching a new business in the state. Learn how to start a limited liability company (LLC) in Colorado with our simple guide. We’ll walk you through the process step by step and highlight important considerations.
Before You Create Your Colorado LLC
There are a few things to know and do before you move forward with setting up a limited liability company, or LLC. For instance, you should know what an LLC is and its distinct advantages for business owners.
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Paper Documents Might Not Be Available
We found that the Secretary of State (SOS) requires many businesses to file forms electronically. Please keep this in mind, as you may be required to create an account and complete various processes online, including payments.
Confirm Your Preferred LLC Name Is Available
It would be highly inconvenient to settle on a business name, only to learn that another company already registered it ahead of you. The SOS website provides two ways to double-check name availability:
- Perform a name availability search
- Run a business database search
Foreign entities wishing to expand into Colorado are advised to perform a true name availability search. If you cannot use your preexisting brand name, you must register an assumed name instead. Other name-related information is available through the Colorado Secretary of State website.
If everything is in order, you can file a Statement of Reservation of Name online. Though forms get filed electronically, the official website offers a sample form to look over. It costs $25, and the state lets you reserve a business name for up to 120 days. Should you want to hold a name beyond that, you must file a Statement of Renewal of Reservation of Name form and pay an additional $25.
Set Up Web Domain and Social Media Accounts
While ensuring your ideal LLC name is available through official channels, this is also the best time to check for domain and social media availability. Many businesses find it easier to establish their brand if they can promote it online through official websites and accounts on platforms such as Twitter or Instagram.
Get a Registered Agent
By law, all corporations and LLCs doing business within Colorado are required to have a registered agent. The agent is responsible for accepting legal documents such as lawsuits and subpoenas on behalf of the LLC.
You or another member or employee of the LLC can act as the registered agent as long as you are 18 or older and a Colorado resident with a physical address within the state. Unlike most states, Colorado allows the LLC to act as its own registered agent. You can also hire a person or company to perform the role of agent on your behalf.
The cost of a registered agent for your Colorado LLC varies from a little over $30 to as much as $300. Before hiring anyone, be sure to check that they are reputable and offer the services you need. We’ve compiled a list of the best registered agent services for your reference.
Setting Up an LLC in Colorado
Once you have your business name and registered agent selected, you can file your Articles of Organization through the state website. This is an entirely digital process, including payment of the $50 filing cost. You can use a credit card, debit card or prepaid account to pay the fee, and the SOS accepts Visa, Mastercard, American Express or Discover.
Alternatively, foreign entities, or businesses originating outside of Colorado, must submit a Statement of Foreign Entity Authority and pay $100. Be sure to file the correct form—if you mistakenly file as a domestic entity it will cost you $150 to correct the error.
If you are unsure of your exact needs during the process, the Secretary of State has a checklist laying out requirements at each step.
After You Establish Your Colorado LLC
Once you successfully complete the online filing process and pay all applicable fees, there are a few other steps to take that will ensure the long-term success of your LLC.
Correct Any Errors
If you find any mistakes, it is essential that you fix them as soon as possible. You can file amended Articles of Organization online for $25. LLCs can also file a statement of correction for everything from the entity name to the business address to the registered agent for $10 per type of correction made.
File Your Periodic Report
In Colorado, limited liability companies must hand in a periodic report to the Secretary of State. This documentation ensures all information about your LLC is accurate and up to date. The report is also vital for maintaining your business’s “good standing.”
LLC owners typically get notified when their periodic reports are due. The process is digital, and you only pay a $10 filing fee if you complete everything on time. Should you submit your paperwork late, you are required to pay a $50 charge.
Develop an LLC Operating Agreement
Although not required, an LLC operating agreement is a helpful guidepost, minimizing any potential disputes with your business partners by laying out the ground rules for how you intend to run your LLC. The agreement typically includes everything from the amount of money members will each contribute to the way the business will operate day-to-day. It is also seen as a necessity for lending legitimacy to your business. There are various templates available online to help you develop your unique operating agreement, or you can consult with a lawyer or online legal services provider.
Employer Identification Number (EIN)
Most businesses need an EIN, also called a Federal Employer Identification Number (FEIN) or Federal Tax Identification Number (FTIN). However, if your business is a single-member LLC and you do not have any employees, you can use your Social Security number instead. Even if it’s not required, an EIN is ideal for protecting the privacy of your Social Security number. It is easy to get one on the official IRS website and there is no charge.
Pay Your Taxes
Because LLCs are pass-through entities, LLC owners are only taxed once for the business. That said, the state charges a flat tax rate of 4.63% on any profit earned during the year.
LLC State Guides
Frequently Asked Questions
What Is an LLC?
A limited liability company balances the relative ease and flexibility of a partnership or sole proprietorship structure with the increased risk protection of a corporate structure. Like corporate shareholders, LLC owners (known as “members”) enjoy limited liability, meaning personal liability to the company includes only what members have invested and does not extend beyond it to cover corporate losses or debts.
By default, members of an LLC pay taxes as a share of personal income just as owners of a sole proprietorship or general partnership would—this is often referred to as a “pass-through” tax structure. An LLC can elect to be taxed as a C corporation C-corp or S corporation (S-corp) if it meets certain requirements. Many small business owners choose LLCs for their simplicity and flexibility.
How much does it cost to set up an LLC in Colorado?
The state of Colorado charges $50 to form a domestic LLC and $100 to register a foreign LLC.
Can I set up an LLC by myself, or should I hire someone?
You may be able to set up an LLC by yourself, especially if you’re a single-member LLC. Do your research and head to your state’s business formation website to determine the exact paperwork you need. However, before establishing any kind of business, it’s a good idea to get professional advice to make sure you’re making the best decision for your situation.
Can I act as my own registered agent in Colorado?
Yes, as long as you’re a Colorado resident who is at least 18 years of age and you have a physical address within the state of Colorado. It is also possible to have another member of the LLC step into the role of agent.
What if I wish to dissolve my LLC?
If you wish to end your Colorado LLC, file a Statement of Dissolution with the Secretary of State and pay a $10 charge.
What are the different types of LLCs to set up?
When determining how to start an LLC, there are several types of LLCs to choose from. Knowing the LLC structures available is essential for selecting a business model that most closely aligns with the nature of your company and how you intend for it to operate. These LLC structures include:
- Single-member LLC: This LLC is owned and operated by a single person. While similar to a sole proprietorship, this LLC provides additional tax benefits and liability shielding.
- Multimember LLC: Standard LLCs with more than one member, often divided into manager-managed or member-managed entities.
- L3C: These entities, also known as “low-profit liability companies,” act as a bridge between nonprofit LLCs and for-profit LLCs where the business cause remains the primary focus rather than earnings.
- Series LLC: Series LLCs are tiered business structures where the topmost LLC owns a series of lower-tiered LLCs through limitless segregation. Each LLC in the series operates mostly independently of one another; their assets are also primarily separated.
- PLLC: A specialized LLC, this business formation type is only available to certain licensed professionals.
- Restricted LLC: Restricted LLCs are not taxed during the first 10 years of formation. Likewise, they cannot make distributions to members. It must be stated in the articles of organization that the LLC will be restricted.
