So, you’ve decided to start a business in Colorado but quickly realized the steps to forming an LLC are extensive and a bit confusing. Don’t fret; with careful planning, you can make sure your Colorado LLC is off to a good start. If this is your first business venture or first time forming an LLC, you might wonder where to start.
In this guide, we’ll help you get your Colorado LLC off to a successful start by walking you through your next steps, detailing the associated costs, and providing you with all of the necessary paperwork. Follow these step-by-step instructions to get your Colorado LLC formed and be on your way to growing your business most efficiently.
The 5 steps to form an LLC in Colorado:
Step 1: Name Your Colorado LLC
While brainstorming about your company, you’ve likely thought of a business name. But an LLC name is more than just a creative way to market your services; it also has to comply with state regulations. In this case, you’ll need to register your business name with the state of Colorado.
Start by creating a list of possible names, then run each through the Colorado Secretary of State Name Availability Search page to find one that is not in use. When you enter a name in the search, try entering just the key portion of the name and not the name in its entirety. This will yield more search results, particularly any that are close to your name.
To be in good standing with Colorado state law, your company’s name must end with the proper suffix. The following list includes all legally allowed phrases or abbreviations you can add to the end of your business name:
- Limited Liability Company
- Ltd. Liability Company
- Limited Liability Co.
- Ltd. Liability Co.
Colorado law states that a business name can’t include any term that would violate any state statutes. The name doesn’t need to be in English; it just needs to be written in English letters or Arabic or Roman numerals.
While you can use any business name that is not an exact match to another, it’s a good idea to have something that sets you apart from the competition and makes it easier to establish your business online. A quick domain name search will show you if a name is available or already taken. At ZenBusiness, we can secure a domain name for your business website and email address. We also offer privacy features to protect your information and limit spam and unwanted solicitations.
Once you’ve found a name that satisfies your business goals and Colorado’s requirements, you can lock it in. After searching for your company name, you will be redirected to the Statement of Reservation of Name. If you wish, you can submit this form and a filing fee of $25 to the Colorado Secretary of State to reserve your LLC’s name for 120 days. A paper form is not available.
If the name you’ve chosen is approved, it will be put on hold for 120 days. This will allow plenty of time for you to finish establishing your LLC.
Sometimes, LLCs have more than one name. There’s its legal name that’s registered with the state, and there can be a trade name, as well. A trade name, known as a “doing business as” (DBA) name, is an alternate name under which your LLC can do business. Trade names are often used when owners want to operate under a shorter or simpler name than their official LLC name. They are used for advertising and other sales purposes, too.
The state requires you to register a trade name if you will be doing business under a different name from the LLC’s actual name. A trade name doesn’t have to be unique from other DBA names in Colorado, so you won’t need to do a name availability search before registration. You just need to complete a Statement of Trade Name of a Reporting Entity online and submit a $20 fee.
Registering a trade name in Colorado doesn’t mean that the name will be protected from others using it, so you may want to consider registering a trademark with the state of Colorado. A trademark is a word, a symbol, or a combination of the two that identifies goods or services offered by a specific company.
Registering a trademark with the state is a way to protect your business name within Colorado. The fee to do so is $30, and the registration is good for five years. After this period, you’ll need to file a trademark renewal. To protect your trademark at the federal level, you can register with the United States Patent and Trademark Office. This will ensure broader protection if you’re planning on doing business outside of Colorado. You can also search its trademark database to make sure your desired name isn’t already federally trademarked.
Step 2: Appoint a Registered Agent in Colorado
To continue with the registration process, Colorado requires that every LLC appoint a registered agent. The person or entity appointed will be the point of contact for legal matters — if your company is subpoenaed or sued, service of process papers will be delivered to your registered agent.
The company owner can be the registered agent, but this is not always the best option. After all, being served in front of customers is a sure way to deter business, and with so many alternatives, it could be in your best interest to hire an outside registered agent service.
Your resident agent must be either a resident of the state of Colorado or a business entity authorized to do business in Colorado, and they must have a physical street address in the state. P.O. boxes are not allowed.
Hiring an outside registered agent service is an affordable way to save you possible troubles later on. It also gives your business an official address with the state so that, if your business ever moves, you won’t have to file an amendment with the state (and pay the accompanying fee) to update your location. A registered agent service receives important legal and other correspondence from the state, which helps you:
- Organize important legal documents
- Keep your LLC in compliance
- Avoid legal fees and penalties
Step 3: File Colorado Articles of Organization
Once you’ve reserved a name and have appointed a registered agent, it’s time to certify your LLC in Colorado. To start doing business, you’ll need to complete your Articles of Organization and file them with the Colorado Secretary of State. Your Articles of Organization is a legal document that officially creates your LLC. It lets the government know important details about your new business.
You’ll need the following information to fill out the Articles of Organization form accurately:
- The name of your LLC
- The principal office address of your LLC
- The mailing address of your LLC
- The name and address of your registered agent
- The type of management you plan to have, whether the LLC will be run by its members (owners) or by a manager appointed by the members
You’ll need to use the Secretary of State’s online portal to complete your LLC registration, as a paper form is not available, and pay a nonrefundable filing fee of $50.
Step 4: Create an Operating Agreement
Operating Agreements are not always required — and not mandatory in Colorado — but help create governance for an LLC. This document outlines your business structure and covers the rules your company will follow, how finances will be handled, lists specific LLC members, spells out how decisions will be made (including partner voting structure), and details any additional regulations.
If you’re starting your LLC alone, you may feel an Operating Agreement is unnecessary, especially since one is not required to proceed in Colorado. However, LLC Operating Agreements can outline what happens to your company if you leave or become incapacitated and help protect you and your assets in case of dissolution or bankruptcy. If you are starting your LLC with partners or other managers, each party will need to agree to the terms and sign the document.
Step 5: Apply for an EIN
The final step to starting your Colorado LLC is to obtain an Employer Identification Number (EIN). It’s also known as a tax ID number and a Federal Employer Identification Number (FEIN). This unique nine-digit number allows the government to identify and tax your business. It also allows you to:
- Hire employees
- Open a business bank account
- Keep business and personal taxes separate
Unless you are a single-member LLC with no employees, an EIN is required for all tax and financial paperwork. You can get an EIN from the Internal Revenue Service (IRS). To apply, you can call the IRS Business and Specialty Tax Line at 800-829-4933 or visit the IRS EIN application page online. Once you submit the application, you’ll immediately receive your EIN.
An Employer Identification Number (EIN) is considered your tax ID number for your LLC. Receiving an EIN is an easy but necessary process. Your EIN will identify your company to the IRS much like your social security number identifies you with the federal government. It will allow you to open a business bank account, and it’s required when hiring employees.
How much does it cost to start an LLC in Colorado?
Starting an LLC in Colorado is relatively affordable. The total cost varies depending on several factors, but your basic LLC startup cost will range from $50 to $125. Filing your Articles of Organization will only cost you $50; however, it also costs $25 to reserve a business name, $20 to register a trade name, and $30 to register a trademark.
Of course, these costs are just the beginning. The state also requires LLCs to file an annual report known as a periodic report. The fee for filing this report online is $10. Add in the cost of hiring a registered agent and fees for licenses, permits, and insurance, and starting a business in Colorado becomes significantly more expensive.
Fortunately, that’s where ZenBusiness can help. We can help you form your Colorado LLC by completing and submitting all of the necessary paperwork, providing registered agent services, and supplying an Operating Agreement template.
For a bit more per year, you can also get more comprehensive benefits, including expedited services, obtaining your EIN, and a business webpage. Whichever plan you choose, partnering with ZenBusiness means peace of mind for you at every step of your LLC’s formation.
What are the benefits of an LLC in Colorado?
When starting a business, there are various forms it can take. Despite the options, 90% of ZenBusiness customers, along with the majority of entrepreneurs, choose to form an LLC. LLCs combine the benefits of other business entity types.
Forming a Colorado LLC means you’ll reap the following benefits:
- Personal asset protection. Your personal liability will be separate from your business liability and debts.
- Avoid double taxation. You’ll only pay personal taxes rather than both personal and corporate taxes.
- Flexible management. You’re not required to have a board of directors or annual meetings.
- Less reporting: Compared to corporations, LLCs have fewer required meetings and reports.
Colorado also offers funding programs and tax incentives for businesses of all sizes. You may qualify for one or more of the many startup and small business grants and tax credits that are available. The Colorado Office of Economic Development and International Trade can help you determine which opportunities align with your LLC operations and goals.
For a more in-depth look at why an LLC might be a better option for you, see our breakdown of what an LLC is and how it compares to a corporation.
How is an LLC taxed in Colorado?
Anyone who has filed personal income taxes probably knows what a headache taxes can be. When you have a business, it can quickly become even more complex. Below is a quick look at the basics of LLC taxes at the federal and state levels.
Federal LLC Taxes
- If you are the only member of your LLC, the federal tax default will be to tax the business as a sole proprietorship. The LLC itself will not be taxed on profits. Instead, you will include all of the business income and losses with your personal taxes.
- If you have more than one member in your LLC, the federal default is to treat your LLC as a partnership. This requires obtaining an EIN, which can be done on the IRS website. You must also file an information return for each tax year, which indicates how much each member received and invested in the business. As an individual, you will include the percentage of the business profits you received on your personal tax return.
- You can opt to be taxed as a C corporation by filing form 8832. If you do this, you will need to file a business tax return each year and include any of your income from the business in your personal tax return.
- You will need to make quarterly estimated tax payments throughout the year to avoid penalties when you file taxes. (When you work a regular job, your employer takes your taxes out of each paycheck, but when you have your own business, it is your responsibility to make the tax payments.)
- If you have employees, you will need to withhold federal, Social Security, and Medicare taxes from their paychecks throughout the year and submit payments to the IRS.
Colorado LLC Taxes
- Whatever your tax designation is on the federal level (individual, partnership, corporation, etc.), it will be the same on a state level.
- Just as with federal taxes, you need to make quarterly estimated payments.
- If you are selling items and collecting sales tax, you will need to obtain a sales tax license from the state.
- If you have employees, you will need to create a Wage Withholding Account with the Colorado Department of Revenue.
- If you are designated as a corporation on the federal level, you will need to file a state business tax return. If you are designated as a partnership on the federal level, you will need to file an information return, just as you did with the IRS.
Colorado LLC FAQs
- What is the processing time to form my Colorado LLC?
Seeing as Colorado only accepts electronic filings, your Articles of Organization will be processed immediately upon payment.
- Do I need to file my Operating Agreement with the state of Colorado?
No. The Operating Agreement is an internal document that you should keep on file for future reference. While some states legally require LLCs to have an Operating Agreement, Colorado does not.
- What tax structure should I choose for my Colorado LLC?
If you own an LLC, you’re responsible for paying various state and federal taxes, such as income tax and self-employment tax. You can choose the tax structure that’s best for your LLC when you apply for an EIN. This federal application lists all of the available tax classification options.rnrnAn LLC with one owner, or member, is by default taxed as a sole proprietorship (or “disregarded entity”) by the IRS. An LLC with two or more members is by default classified as a partnership. LLCs can also choose to be taxed as a corporation, but this is usually more advantageous to larger LLCs. There are advantages and disadvantages to each tax structure. It’s best to consult with a tax adviser to choose the right classification for your LLC.
- Does Colorado allow a Series LLC?
No, Colorado doesn’t allow the formation of a Series LLC. It’s a relatively new concept that only a handful of states have approved. A Series LLC is a group of limited liability companies with an umbrella or “parent” company under which multiple “children” LLCs operate.
- Which licenses and insurance are required for an LLC in Colorado?
A general business license is not required in Colorado at the state level; however, certain counties and cities may require one. There is also a wide variety of federal, state, local, and industry-specific licenses and permits that your business may require, so you’ll have to research which apply. A list of which business types are required to have a state-administered license and links on how to apply for those licenses can be found here. rn rnDepending on which type of business you have and whether you have employees, you may be required to have insurance, such as unemployment insurance, professional liability insurance, and so on. Colorado’s government website includes a list of insurance types and the circumstances under which they are required.rnrnIn both instances, we recommend hiring a professional service like ZenBusiness to do the research for you. We can provide you with a comprehensive package of all the licenses and insurance required for your Colorado LLC.
- How do I renew my LLC in Colorado?
To renew your LLC, you will need to file your periodic report through the Colorado Secretary of State’s website. When filing, you will need to pay a nonrefundable filing fee of $10. If you fail to file within a five-month period starting two months before and ending two months after your anniversary of registration, you will be charged a $50 penalty, and your LLC will be classified as “Delinquent.” This classification will strip your LLC of specific rights and privileges.rnrnTo renew a trade name, you need to file a Statement of Trade Name Renewal through the Colorado Secretary of State’s website. You can do this anytime within three months before its expiration date.rnrnPartnering with ZenBusiness means you don’t have to keep track of periodic reports or trade name renewal deadlines. Let the experts keep tabs on your LLC, and rest assured you’ll be informed of any vital deadlines.