If you’re looking for a reliable DIY guide for starting an LLC in Colorado, look no further. Below you’ll find all the information you need to launch your business and handle any associated costs. Follow each step carefully and your LLC will be established and ready to hit the ground running.
That said, the process can be complex, with various filings and costs, so if at any point you need help, you can hire an online incorporation service – they’ll take care of the paperwork so you can spend more time growing your business.
Recommended: Compare the Top LLC Services
If you’re new to the process of starting an LLC, you might also be unfamiliar with the LLC formation services that are reliable and offer great value – like ZenBusiness. As a reference point we compared them to the two most well known LLC formation services, IncFile and LegalZoom. See our comparison guides for more information:
Step 1: Name Your LLC
What’s in a name? Quite a bit, actually. Your business name is your Colorado LLC’s identity, its personality, its reputation. Find a name that sticks in customers’ minds – while conveying your brand qualities – and you’ve struck gold. A unique, memorable name can draw in new customers and keep existing ones coming back.
Your LLC name is going to appear everywhere: business cards, marketing collateral, websites, legal contracts, bank accounts, invoices, directories, and much more. So be sure that it conveys your product, service, brand, and values.
While you can (and should) be creative with your business name, there are certain state requirements that it must follow.
As mandated by Colorado law, any name you use must include one of the following terms: “limited liability company,” “ltd. liability company,” “limited liability co.,” “ltd. liability co.,” “limited,” “l.l.c.,” “llc,” or “ltd.” And it must not already be taken by another business, so you’ll need to confirm that it’s distinguishable from all existing Colorado business names.
Let’s say you discover that your name is unavailable. How can you distinguish it? These changes will do the trick:
- Adding, removing, changing, or rearranging key words
- Adding or deleting an article (“a,” “an,” or “the”)
- Changing the business type designator (LLC, Ltd., etc.)
However, these changes won’t be enough to make your name unique:
- Adding, removing, or altering punctuation, including periods, commas, underscores, apostrophes, and inverted apostrophes
- Altering capitalization or spacing
Consider this: your friend Fanny wants to open a flower shop in Boulder, Colorado. The name she wants, Flowers by Fanny, LLC is already in use. Changing this name to flowers by fanny, LLC won’t cut it. So she comes up with a new one: Fanny’s Florals and Design, LLC. This name is similar to the original but includes new words, distinguishing it in the Secretary of State’s records.
Determine the Name is Available
Of course, you will only need to make distinguishable changes if your name is already taken. Don’t make the mistake of ordering business cards, creating advertisements, and using a name on documents like the Articles of Organization without first confirming it’s available. Use the Secretary of State’s Name Availability Search to see if there’s an existing business using your desired name.
Maybe you pegged a distinguishable name right away, or maybe it took some modifications, but either way, once you have a unique name, you can lock it down by filing a name reservation.
Optional: Name Reservation
You may have fallen in love with a particular name, but still have some preparation and paperwork to sort out before starting your LLC, and you’re worried that someone will swipe it in the meantime. Calm your nerves by applying for a renewable 120-day name reservation to protect it.
Think about Fanny. After making her name distinguishable, she’s ready to make it official, but if she’s waiting on some paperwork to start her LLC, she can place a hold by filing a Statement of Reservation of Name online.
Step 2: Choose a Registered Agent
Fanny’s LLC is quickly taking shape, and if it’s going to operate in Colorado, she’ll need a go-between for state and legal communications. This is called the registered agent.
A registered agent is a key component of your budding LLC, handling all of its sensitive communication with the state so you don’t have to. The Secretary of State website describes the registered agent as “the individual or business responsible for accepting service of process for an entity and isn’t necessarily an owner or director. The registered agent is responsible for forwarding service of process to the entity.”
Taxes, lawsuits, maintenance requirements, and more – the registered agent takes care of it all. If you had to do this yourself, it would pile additional tasks onto your already-full plate. Plus, your agent makes your business available to receive documents even when you’re out of town or away from the office. This is especially important if your physical office is outside Colorado.
But maintaining an agent isn’t just a convenience, it’s required. Just take it from Colorado Revised Statute 7-90-701, which states that “every domestic entity for which a constituent filed document is on file in the records of the secretary of state and every foreign entity authorized to transact business or conduct activities in this state shall continuously maintain in this state a registered agent.”
You can designate either an individual or a business entity as the LLC’s registered agent on you Articles of Organization.
Individual as Registered Agent
You may think that an individual registered agent would need specialized training or experience, but this isn’t the case. In fact, anyone can serve as an LLC’s agent as long as they meet certain requirements. A valid agent must be a Colorado resident who is at least 18 years old and has a physical address in the state (P.O. boxes are not allowed).
This means that family, friends, business acquaintances, and more are all valid options. Although sometimes using a third party like an attorney or consultant – someone familiar with the particulars of maintaining an LLC – can be an even better option.
Registered Agent Service
It can be a lot easier, though, to use an LLC formation service like IncFile or Northwest Registered Agent, so we highly recommend it. Not only will they take care of business formation requirements, but they’ll also include a free registered agent service. Or, if you’d rather start your Colorado LLC on your own, you can use a national registered agent service to cover your agent duties.
During the life of your LLC you may, at some point, need to change your registered agent. Perhaps you want to switch from an individual to a professional service, or maybe your existing registered agent resigns. Either way, you’ll want to make the change as soon as possible because operating without an agent on file can lead to administrative dissolution.
Step 3: File the Formation Documents with the State
This is where the LLC formation process kicks into high gear. Let’s check back in with Fanny.
She’s reserved her unique business name, designated a registered agent, and she’s ready to get her LLC off the ground. It’s time for Fanny to take on the most important LLC document: the Articles of Organization. This filing creates a record for Fanny’s Florals and Design, LLC with the Colorado Secretary of State, giving it authorization to commence business in the state.
You must complete and file your Articles of Organization online. Paper applications are not available, although you can find a sample document here. The filing fee is $50, so have a credit or debit card ready when you file.
Online submissions are processed immediately and the Secretary of State does not mail out copies of the completed Articles of Organization. But if you need to reference your form, you can access it on your LLC’s summary page by clicking “Filing History and Documents.” Find your summary page by searching for your business here.
Step 4: Create an Operating Agreement
The operating agreement is the framework that holds up an LLC, the vital underpinning that establishes processes for its procedures, activities, and conduct. Essentially, it serves as your company’s bylaws.
Your LLC isn’t technically required to adopt an operating agreement as part of its Colorado formation process. But it’s an incredibly important document to for your business success, so we strongly recommend creating one. By doing so, you’ll not only be entrenching your LLC’s customized processes, but also protecting your assets and legitimizing your company to courts, banks, and more.
Let’s say our friend Fanny sells a percentage of her company to two other owners. Her operating agreement could stipulate how the LLC’s assets would be distributed among them in the case of dissolution. But if she decided to maintain sole ownership, the agreement could be used in court as evidence that the LLC’s assets are separate from her personal ones. These are just two examples, but the operating agreement governs everything from member duties to tax structure.
If you’ve decided to draft an agreement, there are two ways to go about it:
- Write it yourself. Don’t be intimidated by this option. There are plenty of free online templates that serve as helpful guides. You can create an effective document from most of the templates out there, but we recommend getting one through ZenBusiness, which includes a free LLC operating agreement with every package. This will save you a lot of time and money.
- Hire an attorney. If you want to be absolutely sure that you don’t miss any important details, an attorney can write or review the agreement for you, ensuring that it complies with state law, includes all necessary information, and avoids the state’s default laws.
What are default laws?
Each state has its own set of generic, baseline laws for how LLCs should operate. These laws, however, only govern matters not included in your operating agreement. Take dissolution, for example. If your LLC ever dissolves, your operating agreement would determine what happens to its remaining assets and debts. But if you fail to include it in the agreement, the state will make that decision for you.
Because default laws are broad and not tailored to your specific business, they often aren’t in your LLC’s best interest, so it’s best to avoid them by being as comprehensive as possible in your agreement.
Step 5: Get an EIN
There’s simply no way to avoid taxes. In fact, it’s illegal to try, so don’t do it.
Federally, LLCs are classified as “pass-through” entities, businesses that don’t file corporate tax returns, but whose owners include income and losses on their individual returns. Still, there are certain circumstances that require LLCs to pay federal taxes, like classifying as a corporation or partnership, hiring employees, or selling merchandise. So, in Fanny’s case, if she plans on hiring additional florists and selling bouquets, she will need to apply for an EIN.
The Employer Identification Number (EIN) is a nine-digit number that the IRS will use to identify your company’s tax accounts, so if you pay any business taxes, it’s extremely important to have one. Click the “Do I need an EIN?” link on this page to see if you fall into this category. If so, apply for an EIN one of three ways:
Need to get this done quick? File online – it’s by far the most efficient method. You can only complete the process between 7 a.m. and 10 p.m. EST, Monday through Friday, but you’ll receive your number immediately upon finishing the digital form. Keep in mind that you will need to provide a valid individual taxpayer number (like a Social Security Number) as part of the process.
You might prefer the feel and security of a paper form. In this case, download Form SS-4, complete it, and fax it to (855) 641-6935. You will receive your EIN within four business days.
Or, there’s always trusty postal mail. However, this is the slowest option, as processing typically takes around four weeks. If that doesn’t deter you, fill out Form SS-4 and send it to:
Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999
Okay, so you’ve filed the Articles of Organization, designated a registered agent, adopted an operating agreement, and filed for an EIN. Time to start doing business, right? Sorry, there are a couple of additional steps you may need to take first. But don’t worry, you’re almost there!
Step 6: Taxes, Licensing & Income Reporting
For all intents and purposes, most LLCs will be official after completing all the prior steps. Still, it’s important for business owners like Fanny to keep looking ahead, as there are certain maintenance requirements to keep a Colorado LLC running smoothly and in good standing with the state.
Before you start doing business, create a plan for the following potential LLC requirements:
As mentioned earlier, LLCs are almost always classified as “pass-through” entities, which means that they don’t pay income taxes directly to the federal government. That responsibility falls instead on the owners, who must include business income and losses on their personal 1040 tax returns and/or Schedule C. LLCs are flexible with tax structure, so you can choose to have yours taxed like a corporation instead. In this case, it would need to file a separate corporate tax return.
Just like federal income taxes, Colorado LLC owners report their income on individual (rather than corporate) tax returns. In some cases, Colorado offers a gross receipts tax as an alternative to income tax. To qualify for this tax, your in-state income must total less than $100,000. Additionally, gross receipts taxpayers must not rent or own real estate in Colorado.
Some states impose an additional “franchise” or “privilege” tax on their LLCs, but Colorado does not.
But you’re not in the clear yet. Your LLC may owe specific circumstantial taxes if it meets certain conditions. One of the most common requirements is withholding and paying employee income taxes (either online or by mail), necessary if your LLC hires employees. Employers must also pay Unemployment Insurance Taxes, for which you can register through the Department of Labor and Employment.
Plus, depending on your LLC’s location, it may owe a local tax to its city, municipality, or county. Consult your local government’s website to find out.
The Articles of Organization may have already made your business legitimate, but your LLC might still need to obtain a license before doing business. This all depends, however, on the type of business you run.
The Secretary of State’s office does not issue statewide licenses. Instead, you’ll need to check with the Department of Revenue, the Department of Regulatory Agencies, or your local city or county government to find out if your LLC requires licensure.
Once you’ve taken all the steps to start your LLC, you’ll be off and running, making deals and growing the company. But when you’re rolling along and things are moving 100 miles per hour, don’t forget that Colorado requires all of its businesses to submit one important recurring filing: the Periodic Report.
Your LLC will be responsible for filing a Periodic Report online and paying the requisite $10 fee every year, keeping the Secretary of State updated with your most current business information. You can find your Periodic Report due date on your LLC’s summary page. Here’s how to get there:
Mark this date in your planner or in your phone so you won’t forget, and for another reminder, you can register for the Business and Licensing Division’s email notification service.
If you miss the due date, don’t worry; you have two months to file a late report. But if you don’t file within three months, your LLC will lose its good standing with the state and be labeled “noncompliant” instead. Plus, it will incur a $50 late fee.
Spend more than 60 days in noncompliant territory and your LLC’s status will change to “delinquent,” and you will have to restore its good standing by filing a Statement Curing Delinquency.
And we’ve come to the end. It’s a long process, and not always easy, but the reward is well worth it. If you’ve made it this far, congratulations! Your Colorado LLC is ready for takeoff. So go ahead and start with that big sale, promotional campaign, or business deal. Maybe you’ll see Fanny out there in the business world, selling her beautiful floral creations.
Need Help Creating Your Colorado LLC?
If you even skimmed this guide to look over the steps, you likely got a sense of how many moving parts there are when starting an LLC. Can you do it all yourself? Absolutely. We have complete confidence in you.
But if you’d rather hand it off to someone else and not have to worry about it again, we recommend using an LLC formation service. This way, you can go about your other business responsibilities with the confidence that everything will be submitted correctly and punctually.
Plus, an LLC formation service can handle maintenance items like Annual Reports, so you can take them off your to-do list. And on top of that, many services also provide a registered agent.
Sound good? Whether you know that you’ll need an LLC service or you’re just exploring your options, take a look at IncFile and Northwest Registered Agent. These are two of the top services available. And you can take our word for it because we’ve done a whole lot of research on the topic.