How to Set Up an LLC in Colorado?

Last Updated on April 19, 2024 by Dr. Gabriel O’Neill, Esq.

Where else can you encounter a varied terrain encompassing dry deserts, meandering river canyons, and snow-clad Rocky Mountains? Colorado, with its population drawn to the allure of the great outdoors, touts a highly favorable business climate. The state offers numerous programs and robust incentives that provide essential support to business owners, a skilled workforce, and a regulatory environment that’s easily navigable.

A prevalent method adopted by many small businesses and startups to establish their professional presence is through the creation of a Limited Liability Company or LLC. Establishing a Colorado LLC is a straightforward and advantageous endeavor. So, if you’re prepared to embark on a business venture in the Centennial State, here’s your guide on how to proceed.

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How to Get an LLC in Colorado: 6 Steps

Eager to kickstart your business? Colorado simplifies the process of establishing an LLC, offering a completely virtual experience. All you need to do is follow these six steps to create and manage your Colorado LLC.

1. Select the Name of Your Colorado Business

To establish a business in Colorado, your chosen business name should be distinct from other registered businesses in the state and include one of the following indicators:

• Limited Liability Company
• Ltd. Liability Company
• Limited Liability Co.
• Ltd. Liability Co.
• Limited
• L.L.C.
• LLC
• Ltd.

If you’re wondering about the process of obtaining an LLC in Colorado for a specialized profession, note that certain professions require a specific type of LLC known as a Professional LLC or PLLC. Colorado LLCs for the following professions must incorporate “Professional LLC,” “PLLC,” or “P.L.L.C.” into their business name:

• Attorneys
• Chiropractors
• Dentists
• Optometrists
• Physical therapists
• Physicians and surgeons
• Podiatrists
• Professional counselors (including marriage and family therapists and addiction counselors)
• Psychologists
• Social workers

While it’s not mandatory to reserve your LLC name, if you’re not yet ready to officially file your articles of organization (step three), you may consider reserving your desired name until you’re prepared to proceed with the LLC formation.

To reserve your LLC name, follow the instructions provided on the Colorado Secretary of State’s website. There is a $25 fee, and you must make the payment online when submitting the reservation.

Colorado will hold your LLC name for a period of 120 days as you continue with the formation process. If you need an extension, you can file a Statement of Renewal of Reservation of Name, a Colorado LLC renewal form, to prolong the reservation.

Pro Tip: When brainstorming your LLC name, think about your branding strategy. If you plan to have a website, it’s a good idea to check domain name availability before reserving your LLC name, ensuring consistency across various platforms.

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2. Designate a Registered Agent

Mastering the process of obtaining an LLC in Colorado or any other state involves the crucial decision of selecting a “registered agent.” Your Colorado LLC is required to have an individual and a physical address within the state where tax and legal documents can be received during standard business hours. There is a wide array of registered agent companies available, with the option to hire one for as low as $50 per year.

Depending on your availability at your home or office, you might find it more convenient to engage a registered agent’s services rather than acting as one yourself. This is because registered agents are obliged to be present at the specified address during business hours.

Here’s a valuable tip: Be aware that your registered agent’s address is publicly accessible information. Consequently, if you choose to serve as your own registered agent, you may be exposed to unwanted spam and marketing communications. Opting for a third-party agent safeguards your privacy.

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3. File Your Colorado LLC’s Articles of Organization

The articles of organization serve as the official document that establishes your LLC. You’re required to complete the filing process and make the payment online. Instead of offering a downloadable form or a physical copy of the articles of organization, the Colorado Secretary of State’s website guides you through a series of questions. Be prepared to furnish the following information, as outlined in the Secretary of State’s Colorado LLC Checklist:

• LLC Name
• Principal address
• Mailing address
• Registered agent’s name, address, mailing address, and consent
• Manager information
• Confirmation of at least one member within the LLC
• Name and address of the individual forming the LLC
• Option for a delayed effective date, if desired
• Preferences for receiving email or text notifications

Pro Tip: If you need to modify any details within your articles of organization, Colorado allows you to do so through an amendment filing, which costs $25. To save money, it’s advisable to avoid making changes by having a formation company assist with the initial paperwork, reducing the likelihood of needing amendments in the future.

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4. Create an Operating Agreement

Congratulations on successfully establishing your Colorado LLC. Now, it’s time to document the operational framework for your LLC. If you’re wondering about the procedures for managing your LLC in Colorado or how to incorporate new members with specific guidelines, an operating agreement can provide the answers.

While not mandated by law, having an operating agreement is highly advisable because it enables you to formalize the rules and procedures for your LLC. Even if you’re the sole member of your LLC, an operating agreement can prove essential for various business-related activities, such as obtaining a loan. Your operating agreement should encompass the following aspects:

• Names of LLC members
• Clarification on whether the LLC is collectively managed by the members or by designated managers
• Defined duties for each member or manager
• Protocols for voting
• Guidelines for profit distribution
• Procedures for the inclusion of new members
• Provisions for member removal or resignation
• Taxation status
• Provisions for dissolving the LLC

Make sure all the LLC members review the agreement and provide their signatures. It’s also advisable to seek the input of a business expert, such as an attorney or accountant, as the operating agreement is a legally binding document.

Insider Tip: LLC formation companies may offer operating agreement templates for a nominal fee. This can be a cost-effective alternative to having an attorney draft one and is generally more reliable than using a free template.

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5. Get State and Federal Tax Numbers

Once your business has been established, you will probably require tax identification numbers in order to fulfill your state and federal tax obligations.

For the state level, the process involves registering your business through MyBiz.Colorado.gov, where you will be informed about the specific tax responsibilities your business must adhere to. Simply follow the instructions provided on the website.

On the federal level, you will also need to obtain a federal tax number, which is issued by the IRS and is known as an Employer Identification Number (EIN). You can obtain this EIN at no cost by submitting a request on the IRS website. This number will be necessary if you have employees or, potentially, if you intend to open a business bank account.

A noteworthy detail to consider is that you might not necessarily require an EIN if your business is a single-member LLC with no employees. However, if you have plans to expand your business in the future, it may be prudent to apply for one regardless.

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6. File Periodic (Annual) Reports

What occurs once you’ve successfully established your LLC? In Colorado, in order to maintain the legal status of your business, you’re required to submit annual reports to the Colorado Secretary of State. The filing fee for these reports is $10.

If you’ve opted to have your LLC taxed as a corporation, you’ll also need to file state business taxes annually. Additionally, LLCs with employees must annually pay state employer taxes.

The specific licenses you may need to keep current can vary based on the nature of your business. To determine if your business requires any licenses, check if it falls under the regulatory oversight of the Colorado Department of Regulatory Agencies.

Here’s a helpful tip: Consider signing up for email notifications from the Colorado Secretary of State to receive reminders when it’s time to submit your periodic report.

How to Start an LLC in Colorado – Buyer’s Guide

What Is an LLC?

An LLC, which stands for “limited liability company,” is a business entity that provides its members with legal protections similar to those of a corporation but without the extensive paperwork and administrative demands associated with the latter.

The term “limited liability” signifies that the individuals who make up the LLC referred to as “members,” generally enjoy protection from personal liability for the business’s actions. This safeguard shields their personal assets from claims by business creditors. It’s important to note that varying liability rules may be applicable, especially in the case of professional services such as law or medical practices.

Colorado LLC vs. Corporation: What’s the Difference?

Colorado has been recognized as a prime location for conducting business, but the question remains: what is the optimal business structure for your specific needs? The available options range from less formal to more formal, and they typically include partnerships or sole proprietorships, limited liability companies (LLCs), and corporations.

Sole proprietorships, in which a single individual conducts business, and partnerships, where multiple individuals engage in business together, are established simply through the act of conducting business. No formal paperwork is necessary, and those running the business are personally accountable for all its actions and financial obligations.

LLCs represent a step up in formality. While some paperwork and ongoing responsibilities are required, LLC members benefit from limited liability, meaning they’re shielded from personal responsibility for the business’s actions, and their personal assets are safeguarded.

Corporations, on the other hand, involve more substantial setup costs and administrative requirements. They’re owned by shareholders and necessitate the appointment of officers, the organization of regular meetings, and compliance with more stringent reporting obligations than LLCs.

LLCs are typically subject to “pass-through” taxation, meaning that the profits of the LLC pass through to its members and are only taxed once as part of the member’s personal income. 

However, LLCs have the option to elect corporate taxation status, often referred to as “C-corporations,” which involves the business paying taxes on its profits in addition to members paying taxes on their income derived from the business, resulting in what is known as “double taxation.” Certain corporations that meet specific criteria may be classified as “S-corporations” for tax purposes, enjoying more favorable tax treatment.

Is There More Than One Type of LLC?

Before delving into the specific steps for establishing an LLC in Colorado, it’s essential to understand that there are three broad categories of LLCs, and your business may fall into one of these categories:

• Professional LLC: Depending on your state’s regulations, you might need to establish this specialized entity if you provide services in fields such as law, medicine, or other licensed professions.

• Series LLC: A series LLC encompasses more than one individual LLC operating under a parent company, or it may consist of separate “series,” each functioning independently with their distinct names, bank accounts, and record-keeping requirements.

• Foreign LLC: A foreign LLC is initially formed in one state but seeks to conduct business in another state, necessitating registration and compliance with the legal requirements of the second state.

Our Picks of the Best-Registered Agent Services

ZenBusiness

You don’t have to worry about the paperwork when you partner with ZenBusiness. This company provides a wide range of LLC services, with a primary emphasis on making sure your business is established accurately and the necessary paperwork is completed and submitted to the appropriate state government office. While ZenBusiness does have service fees, many customers find that they receive excellent value for their money.

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Northwest Registered Agent

Commencing a business involves handling a multitude of state-mandated paperwork, often overwhelming new business owners. Northwest provides a range of business services aimed at assisting entrepreneurs in locating the correct documentation, completing it accurately, and submitting it promptly to the appropriate government agency. Beyond aiding in the establishment of an LLC, Northwest also offers various additional services, including registered agent services, which can prove valuable to new business owners.

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Incfile

Incfile provides a valuable resource library that proves highly beneficial for novice business owners in their quest to determine the appropriate type of business to establish. Following this, Incfile offers assistance with the necessary documentation and filing processes while simplifying concepts like a registered agent, articles of organization, and EIN. The company also enjoys a robust reputation and receives positive online reviews.

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How to Form an LLC in Colorado – FAQs

Should I Form an LLC in Colorado?

If you’re at the early stages of launching your business or have been running it as a sole proprietor, it’s worth contemplating the establishment of an LLC. LLCs provide a means to restrict the owner’s personal liability concerning business debts and legal disputes, all while offering significant flexibility in terms of business ownership, management, and taxation.

How Do I Know If My LLC Name Is Available?

Ensuring the distinctiveness of your LLC’s name from those of other businesses already registered with the Colorado Secretary of State is a crucial step. You can perform a complimentary name search on their website to verify the availability of your intended name.

Do I Need a Business License in Colorado?

Depending on the nature of your business and its specific location, your LLC might be required to secure additional business licenses at the local and state levels. To obtain local licenses, it’s advisable to contact the city where your business operates (or the county if it’s situated in an unincorporated area). For state licenses, you should inquire with the Colorado Department of Regulatory Agencies.

Read more: Cost to Start an LLC

Is There an Annual Filing Fee for My Colorado LLC?

Indeed, your Colorado LLC is subject to an annual filing fee of $10. This fee is associated with the submission of your annual periodic report, which you’re required to file with the Secretary of State (SOS) each year.

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