Note: Colorado had temporarily lowered the filing fees for LLCs to $1 in 2022, but that fee has returned to $50 as of May 2023.
Has the time come to finally make your business dream into a reality? Are you looking into the many different business entities out there to see which is best for you? The limited liability company (LLC) structure is a popular one. It’s known for having liability- and tax-related benefits, among others.
If you’re looking to create an LLC, Colorado is the state to do it. It’s a business-friendly state with a population ripe to turn into customers. Going through the process of setting up a Colorado LLC to conduct business can be a bit of a challenge, almost like dealing with the state’s tough winters. It’s the reason we’ve put together a step-by-step guide that walks you through the process.
In order to form an LLC, Colorado requires you to do so with the Colorado Secretary of State (SOS). The SOS’s website walks you through the process, but if it’s your first time putting an LLC together, you may have a ton of questions and wonder if you’re doing things the right way.
Our guide includes five steps to forming your LLC in Colorado:
If this sounds like a lot of hard work, don’t worry. Each step will go into detail on how to accomplish them. We’ll additionally highlight some of our services that can make your Colorado LLC formation less complicated along with running and growing your business.
If you’re looking to start an LLC in Colorado, then you should know that this guide is for forming a domestic, for-profit LLC. If you’re looking to start a foreign (out-of-state) LLC, then you’ll need to check in with the Colorado SOS. The website has a guide that walks you through that process as well.
Your first step is to decide on a name for your Colorado LLC. This can be a fun process because it can get your creative juices flowing. One thing that you need to remember, though, is that whatever name you choose can have implications from both legal and marketing standpoints.
Your name should be one that you’ll be proud of and reflects what you offer. And, of course, your name needs to follow Colorado’s rules, which we’ll cover next.
In order to properly name your LLC, Colorado has a few rules that you’ll need to follow in order to get your business approved. The SOS website has detailed rules, but we’ll highlight some below:
Once you’ve decided on a name that follows the state’s rules, you can make sure that it isn’t already taken. The SOS website has a tool to do this, but so do we. You can also contact the SOS directly to ask if your name is available.
If all looks good and the name you want for your LLC is available, then you should definitely consider reserving it in the meantime while getting your business set up. To do so with the state, you’ll need to file a Statement of Reservation of Name form. This form can only be filed electronically and will reserve your name for 120 days. You can renew the reservation by filing a Statement of Renewal of Reservation of Name.
If you’d rather simplify this process, you can reserve your name with us.
If you’re looking to trademark your business name, then you should consider Colorado’s rules. As the SOS website states, “A business name is not generally eligible for registration as a trademark, except when the name is used for advertising or placed on goods, i.e., when the name of the entity is used to describe the source of goods or services. You may wish to contact an attorney to discuss ways of protecting your business name and whether you should trademark your business name.”
If you decide to move forward, then you’ll need to file a Statement of Registration of Trademark form with the SOS. The trademark is good for five years and can be renewed. If you want to file a trademark at the federal level, then visit the U.S. Patent and Trademark Office website for more information.
Having an online presence is a great way to build your customer base. A business website with a domain name that matches your LLC’s name can help you reach a larger audience that your physical location can’t. While choosing the best name for your LLC, check if it’s available as a domain name. If it isn’t, then you might want to adjust your LLC name so that a matching and available domain name goes with it.
If you’ve decided to get a domain name, and, by extension, a business website, then, like a potential business name, you’ll need to grab it as soon as you can before someone else does. On top of reaching customers that your physical location can’t, a business website lets you serve customers outside of your city and even the state if you so wish.
We already went over this before, but we want to really push the importance of having a domain name that closely matches your LLC’s name. That way, people will find it easier to locate your website in a simple online search. As always, check out our domain name search tool to see if the domain name you want is available.
In Colorado, you can file for a “trade name” if you’d rather operate under a name different from the business’s true name. This name is sometimes referred to as a “doing business as” (DBA) name.
The state requires for-profit LLCs to file a trade name if the entity plans to do business under a different name. You’ll need to file a Statement of Trade Name of a Reporting Entity form with the SOS. You can register a Colorado trade name with us as well.
Name your LLC
Enter your desired business name to get started
Next, you’ll need to choose a registered agent for your Colorado business. A registered agent is a person or entity that’s tasked with receiving important documents, like service of process, on behalf of your business. In Colorado, this agent must have a physical address.
As the owner of an LLC, Colorado requires you to have a registered agent, and failing to appoint one can have some penalties for the business and maybe even its owners. Let’s go over a few things about registered agents.
As we mentioned above, in Colorado, this agent can be either a person or an entity, like a business. There are some requirements to consider:
You should also know that:
During the life of your business, changes will happen. One of them may be a change in registered agents. As we pointed out above, an LLC must maintain a registered agent in Colorado. If it doesn’t, it can risk the following:
You can be your own registered agent if you’d like, and you may want to since it can make things easier, right? The truth is, the duties of this agent can make it difficult to run your business. Here are some things to consider:
Having someone else serve as your registered agent may be the best option. There are many registered agent services out there, but we offer a service to make things easier for you.
You won’t have to worry about losing your registered agent if you choose to have us provide one for you with our registered agent service. Our service ensures that you’ll have someone available to receive important documents on your behalf.
Since having a registered agent for your Colorado LLC ensures that it remains compliant, you won’t have to worry about falling out of compliance with the state. Perhaps the biggest perk of using our registered agent service is not having to take on the responsibilities of this agent yourself. You’ll be free to meet clients, run errands, and more without being tied to the office during normal business hours.
Our registered agent service also keeps documents that have been issued to your Colorado LLC organized through your ZenBusiness dashboard.
File your Articles of Organization with the Colorado Secretary of State. Now that you’ve chosen a great name and know who will be your registered agent, the time has come to submit your Articles of Organization. If all looks good and the SOS approves your Articles, then your LLC will become official. The filing cost is $50 and can only be done online through the SOS website.
If filing official government forms is something that gives you the jitters, then don’t worry. Our LLC formation service can help you out. We’ll handle filing these forms for you and make sure everything is done correctly. Let’s go over the process anyway just to give you an idea of what to expect if you decide to do things yourself.
According to the SOS website, documents that are submitted online are filed in real-time. This means that documents are processed immediately after you’ve received your payment confirmation. You can find more information in the Filing Documents – Business FAQs section of the SOS website.
You should also know that we offer a faster filing service. With it, we make your filing a top priority. And since our formation team oversees all documents, it’s less likely that your papers will be rejected.
If you’ve never filled out a form like an LLC’s Articles of Organization before, then you might be wondering what exactly you’ll need to include. Here’s a general list of what you’ll need to provide:
After filing the Articles, the office of the SOS will provide you with an ID number. This is NOT an Employer Identification Number (EIN).
One thing you’ll have to decide when creating your LLC is whether it’ll be member-managed or manager-managed. You’ll make this decision in the Articles of Organization. If you aren’t sure how you want your LLC managed, then here is a brief rundown of what member-managed and manager-managed mean:
When creating an LLC in Colorado, you’ll only need to file your Articles of Organization once. However, if your business grows and other changes occur, you may need to alter the Articles in the future. If you do this, you’ll need to inform the SOS.
You’ll need to submit an Articles of Amendment form that can only be filed online. The form itself is used to change the LLC’s name, but there is an option to include additional documentation that needs to be amended. Be sure that all information is correct before submitting. Contact the SOS if you need help.
If you decide to have us handle your filing needs, then as soon as Colorado approves your LLC, your paperwork will be available in digital form through your ZenBusiness dashboard. You can also keep other important documents organized here, and you’ll be free to download and print them.
If you have any physical documents that the state sends you, be sure to take good care of them. We offer a business kit that allows you to keep these forms organized in a professional manner.
When filling out your Articles of Organization for your Colorado LLC, you’ll have the option to delay its filing. What does this mean, exactly? As the term suggests, a delayed filing allows you to delay your Articles from being filed.
Why would you want to delay your filing? This varies depending on a person’s situation, so if you feel that you aren’t ready to file the Articles of Organization yet, then you can delay it. The state allows you to delay the start of business filing up to 90 days from the current date. Check out the Colorado Secretary of State website for more information.
Draft an operating agreement for your Colorado LLC. An operating agreement (OA) allows you to establish the rules for how your LLC will operate and other important factors. The state doesn’t require you to put an operating agreement together, but when you start an LLC in Colorado, having one can still be helpful.
If drafting more business documents while creating an LLC in Colorado sounds like a bore, then you might reconsider after finding out the benefits of having an operating agreement.
A few common ones include:
If creating an operating agreement is something you want do but aren’t sure what exactly to include, then consider the following:
✓ If you want to create an operating agreement but aren’t sure how to get started, then check out our customizable template that can help you.
If you’ll be the only owner of the LLC, then you may figure that an operating agreement isn’t necessary. Besides, since it’s only you, then you don’t have to document the LLC’s rules and other factors, right? Well, having an operating agreement even if you’re the sole LLC owner can still be beneficial.
In Step 4, we discussed the merits of having an operating agreement. Having one can make your LLC look more professional and help make it easier to get a loan since some financial institutions may require seeing one before granting said loan.
Perhaps the biggest perk of having an operating agreement as the sole owner of your LLC is delegating what should happen to the business if something happens to you, like becoming incapacitated or dying. An operating agreement can also show that you and the business are truly separate entities, preventing your personal assets from being seized if legal troubles come up.
Your last step is to apply for an Employer Identification Number (EIN) with the IRS. If you’ve never heard of an EIN before, then you should know some things. It’s also referred to as a Federal Employer Identification Number (FEIN) and a Federal Tax Identification Number.
You’re going to need an EIN for tax purposes, if you plan on hiring employees, and getting a business bank account. You can get an EIN through the IRS or with us.
You’ll need to register with the Department of Revenue for a state tax number. The website allows you to access important forms, apply for a sales tax license, file sales and retailer use tax, and more. When signing up, you’ll need to include some information, like your EIN (referred to as a Federal Employer ID Number on the website) and some personal information.
After getting an EIN, you’ll be able to open a business bank account. You should consider having one of these accounts since they allow you to separate your business and personal finances. This can make organizing your taxes easier.
We’ve partnered with LendingClub to offer a discounted bank account. You’ll get unlimited transactions, a debit card, online banking options, and more. Our banking resolution template allows you to authorize others in your business to use your business bank account. Consider getting a business credit card as well to build your Colorado LLC’s credit score.
You should also check out ZenBusiness Money to help you manage your business finances and more all in one place.
Forming an LLC allows you to apply for an S corporation status. If you aren’t familiar with S corps, then let’s review them. Hearing the term “corporation” in S corporation might lead you to believe that it’s a type of business entity. Actually, an S corp is nothing more than a tax designation. This means certain business entities like LLCs and traditional corporations (C corporations) can apply for S corp status.
One thing that might be on your mind about forming an LLC is how it’ll be taxed. LLCs are taxed as sole proprietorships if there’s only one member or as a partnership if there are multiple members. LLCs are a very attractive business structure since they avoid “double taxation.” This means being taxed at the personal and business levels.
With an LLC that has S corp status, you’ll still avoid double taxation while potentially saving some money on self-employment taxes. You’ll be an “employee-owner,” allowing you to divide your income from the LLC into your salary and your share of profits. This way, you’ll only pay taxes on your salary and not on the profits, just the usual income taxes.
However, you should know that an S corp designation does have some drawbacks. The IRS tends to keep a watchful eye on S corps, meaning that you may be at higher risk of an audit. The S corp status is also known to be very difficult to qualify for.
If you’d like to apply for S corp status, then we can help. You should know, though, that we can only do this during the formation period. If you already own an LLC and want to apply for S corp status, then you’ll need to do that on your own. Speak with a tax specialist for more information.
At ZenBusiness, we believe every aspiring entrepreneur should have the tools and support necessary to create a business, which is why we’ve made it easy with our free LLC service. We handle the complexities of starting an LLC in Colorado, while you focus on your business. Along with LLC formation, we provide worry-free compliance services and more to keep your business in good standing. With expert support on hand every step of the way, we have everything you need to run and grow your business effortlessly.
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You may need to do some research to figure out which licenses and permits you’ll need to legally operate in Colorado. The state does not issue or require a general business license. Instead, licenses are issued by different agencies and governments depending on your industry and possibly other factors.
You can start by checking out the Colorado Department of Regulatory Agencies (DORA). The DORA’s website has a page dedicated to looking up which licenses you’ll need depending on your industry. You should also check out the Colorado Department of Revenue’s website for tax-related information for your business.
If doing all of this sounds like a lot of work and time that you’d rather spend on your business, then we can help. Check out our business license report service.
The LLC business model is incredibly popular for many good reasons. A few of the benefits of starting one in Colorado include:
Since the IRS classifies LLCs as “pass-through” entities, Colorado does as well. The company’s owners are required to pay a flat state income tax rate of 4.63% of its profits. Additionally, the IRS taxes the LLC’s owners based on their ownership percentage of the company. So, if an owner owns 45% of the LLC, then they will be taxed 45% of the business’s earnings.
LLCs can also be taxed as either an S corporation or a C corporation. C corp status carries double taxation, but S corp status doesn’t. This is something you should consider since it can affect you in certain ways come tax season. As we discussed in Step 5, S corp status can also help you save on self-employment taxes. Remember, though, that applying for S corp status is tough and the IRS tends to pay closer attention to businesses with this designation.
You should also check out the Colorado Department of Revenue’s website for more information about business taxes.
No, Colorado does not require business owners to file an operating agreement with the state. However, as we discussed in Step 4, having one is still beneficial, so consider putting one together to help your LLC run smoothly.
This is something that you should consider on your own or with a licensed professional. Different tax structures come with different benefits, but they can each also have drawbacks. Many entrepreneurs go for a business structure that has pass-through taxation, and, luckily, the LLC model has this.
Keep in mind that adopting a different tax structure, like C corp status, can remove this feature. An S corp status, on the other hand, retains pass-through taxation, but is difficult to get. Overall, weigh the pros and cons of different tax structures carefully before making a choice.
If your LLC needs to be dissolved, no matter the reason that you included in your operating agreement, then you’ll need to do so through the Colorado Secretary of State. Filing a Statement of Dissolution can be done electronically through the SOS website. You’ll need to include some information that can be found on the SOS’s Instructions: Statement of Dissolution page. You can also visit our Colorado business dissolution guide.
If you plan to transfer ownership of your Colorado LLC to someone else, then how you’ll do that depends on how you’ve stipulated it in your operating agreement. In most cases, there are two options to transfer ownership of the LLC:
Whichever option is chosen will require you to inform the state of the change in the LLC’s ownership. You can do this by filing Articles of Amendment.
If you need to remove a member from your LLC, then you’ll have to ensure that the reason for doing so is laid out in the operating agreement. Additionally, the operating agreement should detail how that member’s ownership interests will be handled after they’re removed.
It’s best to get in touch with an attorney if you’re looking to remove a member to make sure that it’s done so in a legal manner. Also, after the process is done, you’ll have to inform the state of the LLC’s ownership status by filing Articles of Amendment.
Yes, Colorado requires LLCs to file periodic reports, sometimes referred to as annual reports by other states. Failing to do so may jeopardize the company’s “good standing” designation. This report is the state’s way of keeping the LLC’s information up-do-date. Even if nothing has changed, a periodic report is still required.
You can find out when your periodic report is due by looking at your business’s Summary Page on the Colorado Secretary of State website. You’ll need to look up your LLC using the Business Database Search tool.
We can also help you file your periodic report.
Colorado does not require businesses to have a business plan. However, drafting one can prove to be beneficial since it allows you to do the following and more:
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
Written by Team ZenBusiness
Colorado Business Resources
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