Having a Colorado LLC is a better and cheaper option than having other business structures. A limited liability company (LLC) reduces the owners’ personal liability and protects their personal assets. One can start an LLC in two ways, domestic LLCs or foreign LLCs (LLCs in more than one state). By following some basic steps, you can easily form an LLC in Colorado.
On this page, you’ll learn about the following:
- How to Start an LLC in Colorado
- After Starting your Colorado LLC
- Colorado Foreign LLC
- Why an LLC in Colorado
- Best Business Established in Colorado State
- Colorado LLC Formation Review
How to Start an LLC in Colorado
An LLC or a Limited Liability Company is a hybrid business entity combining a corporation’s characteristics with a partnership or sole proprietorship. It separates your personal assets from your business assets, thus giving you personal asset protection. This section gives you a step-by-step guide on how to start a Colorado LLC.
Step 1: Decide a Name for Your LLC
Deciding on a business name is the first step to start an LLC. In Colorado, before you name your LLC, it is important to note a few things. Firstly, make sure the name is available to use. If the name is available, then check if the name complies with all the Colorado business naming requirements. Once you pass through them, you can successfully name your business.
Why do you need a proper business name?
If you want your LLC in Colorado to have special identification, your company name is essential. However, many people face many issues by avoiding focus on choosing a business name for their LLC business formation filings.
Because of this, here are some of the major benefits of choosing the best LLC corporate names.
- To help establish a company’s presence in the market, a proper business entity type will help you. This also creates a new identity and separate business entity that will resemble your LLC.
- After you’ve properly chosen the name for your LLC, you will have no problems finishing the registration process.
- You can only get the EIN when you have your name registration certificate with you.
Requirements when deciding a name for your LLC
LLC Name Search: A business name search is required to check if the desired name is available or not. If the name is available then the business owner has to fill up a name reservation form and send it to the Secretary of State, Colorado. To do the name search, one has to visit the Business Entity Search page on the official Secretary of State website. Send the name reservation form to the below address by mail to reserve your LLC name in Colorado. The cost of a name reservation is $25.
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Step 2: Assign a Registered Agent in Colorado
A registered agent is a person or business entity responsible for working on your behalf. This person or business will receive significant tax forms, legal forms, formation documents, a notice of lawsuits, government filings, and other official government correspondence in Colorado. Choosing a Colorado registered agent for your LLC is required.
Make sure your registered agents are residents of Colorado. It could also be a business. Check out an employee registered agent service provider fit for you:
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Note that availing of the services of professional registered agents would be your best option since you are guaranteed that whoever is handling your legal affairs knows their stuff well. You will enjoy peace of mind and focus only on running your business, as the ‘professionals’ take care of all legal matters.
These LLC formation services are recommended registered agent services as they are authorized to conduct business in Colorado. Compare them to check the best yet cheapest option for you. Besides, they can guarantee you professional service because they have been in the business for years.
Step 3: File Articles of Organization in Colorado
You’ll need a Colorado formation certificate or what is also called the Articles of Organization form. You must make a periodic report of this certificate with the Colorado Secretary of State (you can also view and download sample articles on the site.) You may file them by mail address or online, where the filing fee is $50, which makes up the majority of the LLC cost in Colorado. That is topped with other expenses, of course.
This Certificate of Formation is a legal document needed to legally structure your business. It will indicate details about your LLC in Colorado, like if it is a member-managed or managers-managed.
Before you start filings, you must already have your LLC name and registered agents or employees. You will attach a copy of your Name Reservation Certificate along with a list of the services that your Colorado LLC will offer.
How to File Online
If you do not have time to mail them, you can go to the Secretary of State Online Service. Select “non-subscriber.” Fill out the online form. The website will alert you if your county does not support online filings after selecting your principal county. To know more about online filing, visit the Colorado Certificate of Formation.
Step 4: Create Your Colorado LLC Operating Agreement
An operating agreement is an internal document that legally outlines the proprietorship and operating procedures of your Colorado LLC. This document is vital as it ensures that all business owners are on the same page regarding how they operate, thus reducing future conflicts.
You are not required to have a comprehensive LLC operating agreement in Colorado when starting an LLC, but it is ideal to have one that contains all the details of your business operation. This document would be useful if you decide to dissolve Colorado LLC later.
Step 5: Filing a Colorado LLC EIN
The Employer Identification Number or, simply, the E.I.N. is a nine-digit number given by the Internal Revenue Service (IRS) to make it easier to identify types of business for tax purposes and taxes in general. It is like a Social Security number dedicated to a business’ taxes. The EIN is necessary for any active business or any form of business for that matter.
To obtain EIN (aka FEIN) one has to fill up a form (Online or by mail) and submit it to the IRS. Before sending the form, ask for EIN Assistant. Enter details of your LLC, and finally complete the form and send it to the address given.
Mail to: Internal Revenue Service, Attn: EIN Operation, Cincinnati, OH 45999
Fax: (855) 641-6935 | Fee: Free
Note: You don’t need a Social Security number when getting an EIN. You can proceed to fill out I.R.S. Form SS-4 and leave section 7b blank. You must then call the IRS at (267) 941-1099 to complete your application. Agents or employees will help you with that.
And that’s all! Congratulation, you are now done with all the necessary steps to form your Colorado LLC. If you still haven’t used a professional service from here, I strongly recommend having one to handle the remaining tasks.
After Starting your Colorado LLC
After forming your LLC, there are still some things that you will need. Take note of the following:
- Get a company business bank account
- File Colorado business permits & licenses
- Get liability for business and professional liability insurance with coverage for employees
- File a Colorado LLC annual report or biennial report
- Already existing LLCs that wish to operate in Colorado must register as Colorado foreign LLC.
This page has provided you with steps to LLC formation and filing processes. You now have to remember upcoming filing deadlines and filing fees or filing costs, including fees for late filings to make sure your LLC is up-to-date.
Colorado Foreign LLC
To register a Colorado foreign LLC, one has to file the foreign LLC formation certificate with the Secretary of State, Colorado. Forming a foreign LLC allows you to operate your business in more than one state in the USA as a single business entity. Check Colorado Foreign LLC to know more about having a foreign LLC.
Why an LLC in Colorado
Colorado, located in the western part of the United States, has many tax benefits and incentives to offer to the newly set up businesses. Forming an LLC in Colorado is flexible for its dynamic economic structure. The state provides a handful of incentives to the small business entities if qualified.
Incentive Programs for Small Companies
Once you start your business in Colorado, you will be eligible for several incentive programs. All these programs come with diverse criteria. As soon as your company meets those requirements, you can enjoy the gains from those incentives.
Microloan facility is financial support the Colorado government provides to small entrepreneurial companies. The amount goes up to $50,000 from $5000. The main aim of Microloan is to support small and micro-businesses by providing financial assistance. The Economic Development Commission in Colorado has created this program.
Work Opportunity Tax Credit
This is a federal tax structure. This tax credit encourages companies to hire certain targeted people/job seekers. The Federal government provides a minimum of $2400 and a maximum of $9600 each time a new employee is hired.
Colorado Credit Reserve
This program is created by the Colorado Housing & Finance Authority. Under this program, a newly set up small business can get credit to expand their company in Colorado.
These programs, including State Trade Expansion Program, Regional Tourism Act, Transferable Tax Credit Act, and some more programs, help entrepreneurs start an LLC in Colorado and enjoy the benefits.
Best Business Established in Colorado State
Deciding on the best business to invest your money in, in Colorado is a difficult task. Many competitive industries are coping up in the state in which a person can invest money. If you want to start an LLC in Colorado, you must have proper knowledge about the state’s top industries, which is given below.
The following industry in which a person is willing to invest their money in the state is IT. There are significant technology corporations situated in the state, and there is a continuous demand for more and more companies. This is the quality of IT services that companies in Colorado provide that managed to contribute around $25.32 billion to state GDP.
Health and Wellness
Health and wellness is another business that is rising in the state, with 16000 companies currently. These companies have a list of hospitals directly providing services related to a person’s health care and some wellness products. In the last 5 years, the industry has grown to around 22.1% contributing $16 billion to the state GDP.
Aerospace Manufacturing and Transport
The state is very well known for aerospace manufacturing, with 180 aerospace firms. If you look at the aerospace industries around the country, Colorado’s highest percentage of production is provided. Still, with the increasing demand for the air force and aerospace and the development of new projects, there is a stress on the Colorado Industry of manufacturing. The economic contribution made by the aerospace industry in Colorado is around $15.4 Billion.
Moreover, with the demand in manufacturing, the transportation demand also increases. Now normal transportation cannot carry the aerospace products as they are delicate and need better handling. You can also think of providing some best and innovative services for better transport of the products.
Apart from these famous businesses, if a person wants to invest in a small investment business, then the best options they have are:-
- Bakery Business
- Digital Marketing Business
- Restaurants and Coffee Shops
Colorado LLC Formation Review
Time needed: 5 minutes.
Just to recap, here are the easy steps again when forming an LLC in Colorado. Click on the steps in this list to read the full detail.
- Name your Colorado LLC
The first thing you must do is to choose a company name, which should be unique, easy to find, and available in the state.
- Choose a registered agent
In Colorado, it is mandatory to select a registered agent for your LLC. You can check out our list of our 5 Best LLC Services in the United States.
- File a formation certificate
Filing a formation certificate is necessary when forming an LLC. Depending on the state, it could be called any of the following: Certificate of Formation, Articles of Organization, or Certificate of Organization.
- Create operating agreement
An operating agreement is not a strict requirement but something encouraged when you start an LLC.
- Get an EIN
The Employer Identification Number (EIN), also called Federal Tax Identification Number, serves to identify a business entity like a social security number but for a company.
If you are a resident of Colorado, then you can file your LLC by yourself. However, it is always worth having a professional than doing it yourself to handle legal complexities, paperwork, and other documentation.
Apart from the formation fee of $50 (domestic LLC) and $100 (foreign LLC), LLC costs in Colorado include $10 for Annual Reports every year. LLCs are liable to pay sales tax of 2.9% every year
Immediately after making an online payment, you will get a Colorado LLC.
Every year all the LLC have to submit an Annual Report and pay $10 to the Colorado Secretary of State and renew the LLC. It is mandatory to renew your LLC every year.
Generally, for the LLCs, it is a default tax structure. Once you will obtain the EIN, you will get the various tax structure options to select. Sometimes LLCs choose S Corp to reduce federal tax burdens.
Having an LLC is easier than other forms of business. LLCs have a ‘pass-through taxation’ advantage for which they are excluded from certain taxes. On the other side, the formation of LLCs requires less paperwork and fewer legal complexities. If you have any questions, leave a comment below.