Guide to Forming an LLC in Colorado
Follow our free guide to form an LLC in Colorado:
- Pros and Cons of Forming an LLC in Colorado
- Starting Your Colorado LLC
- Maintaining Your Colorado LLC
- Additional Colorado Resources
Check out our informative guide on how to form an LLC in Colorado, as well as the pros, cons, and how to keep your business compliant with the state.
Pros and Cons of Forming an LLC in Colorado
No Corporate Taxes for LLCs
Colorado does not impose a corporate/franchise tax on LLCs. The members of the LLC are only required to pay state and federal income taxes on their earnings.
Low Sales Tax
Colorado has one of the lowest sales tax rates in the nation — only 2.9% (excluding taxes added by local municipalities).
Low Cost of Doing Business
Colorado is a fairly friendly place for small business owners with a low filing fee and annual report fee, no corporate/franchise tax for LLCs, and a low sales tax rate.
Privacy for Business Owners
Colorado does not require the members/managers of an LLC to be listed in the Articles of Organization. An organizer can submit the filing paperwork in place of the owners.
Higher Average Cost of Living
The average cost of living in Colorado is more than 10% higher than the national average. The median house price rose approximately 40% between 2000 and 2015. By the following year, real estate prices jumped another $30,000.
Problems for Non-Traditional Ventures
Strict regulations make traditional avenues of funding unavailable for cannabis businesses, and publicly traded companies are still not allowed to participate in the selling of cannabis. Additionally, any person who is involved in trafficking cannabis is not eligible for tax deductions.
Cost of Doing Business
- $50 Filing Fee/ $10 Periodic Report
- No corporate/franchise taxes for LLCs
Phase One: Starting Your Colorado LLC
While the idea of forming an LLC may seem like a challenging task, the whole process has far fewer bumps with professional help like Swyft Filings. Below is a list of the steps needed to ensure that your Colorado LLC is formed correctly:
- Step 1: Name your LLC
- Step 2: Establish LLC Ownership
- Step 3: Choose a Registered Agent
- Step 4: File the Articles of Organization
- Step 5: Create your Operating Agreement
- Step 6: Request an EIN
Step 1: Name Your Colorado LLC
The first step in creating your Colorado LLC is to name your business. Both the state and federal government have regulations and restrictions regarding the use of certain words.
Tip: Use a free business name search tool to ensure your company’s desired name is available.
Business Name Guidelines
- The official name of your business must end with: Limited Liability Company, Limited Company, LLC, or L.L.C.
- Your business name cannot be intentionally misleading to consumers
- The name of your new LLC must not be similar to another organization’s name/trademark
- “Lottery” and “Bank” are ineligible for use (any state)
- Terms that represent educational or Veterans’ organizations are restricted
- Terms related to the Armed Forces or civil servants (police, EMT, fire)
LLC business names associated with government and/or financial entities are not always restricted - it depends on the state. Additional paperwork may be required.
Creating an online presence for your LLC is equally important in the current culture. Check domain name availability at a number of online web services sites.
Step 2: Establish Ownership
The owners of an LLC are called members and managers. All LLCs will have members, but not every LLC will have managers—the difference depends on the chosen management structure of the business.
LLC Management Structures:
- Member-managed: All members participate in operating and making decisions for the LLC
- Manager-managed: An appointed manager oversees the daily operations of the LLC and the members are not actively involved.
Colorado LLC Member Guidelines
Required Number of Members
There must be at least one member or manager to form an LLC in Colorado.
Member Disclosure Requirements
An organizer/authorized representative may sign and file the Articles of Organization in place of the LLC members.
LLC members in Colorado may be of any age.
There are no residency restrictions imposed on LLC members in Colorado.
Step 3: Find a Registered Agent in Colorado
Businesses operating in Colorado must have a registered agent. Your business cannot be official without this position.
What is a registered agent?
A registered agent is a person or business who is authorized to accept all government and service of process notices sent to the LLC.
Why do you need a registered agent?
Colorado law requires you to appoint a registered agent so that the state government has a consistent contact person for your LLC.
What are the main requirements for a registered agent?
- The registered agent must have a physical address — not a P.O. Box
- The registered agent must be available during business hours
Who can be a registered agent in Colorado?
- A state resident with a physical address in Colorado
- An LLC or corporation that is licensed to conduct business in Colorado
Is the registered agent’s contact information publicly accessible?
The name and contact information of the LLC’s registered agent is a matter of public record.
Can I be my own registered agent for my business?
You are legally allowed to be your own registered agent as long as you have a physical address in Colorado.
Is being my own registered agent discouraged?
Since the registered agent’s name and address are publicly listed, LLC business owners who choose to be their own registered agent risk compromising their personal information.
Tip: Avoid the hassles and choose Swyft Filings to fill the registered agent needs for small businesses in Colorado. Find more information here.
Step 4: File the Articles of Organization
The most important step for legally forming an LLC in Colorado is to file the Articles of Organization with the Secretary of State.
What is the Articles of Organization?
The Articles of Organization is a legally binding document that is filed with the state government to officially and legally form your LLC.
Why do I need the Articles of Organization?
Your LLC business in Colorado will not be legally recognized by the Secretary of State without filing this document. Consider the Articles of Organization as part of your LLC’s foundation.
What information is included in the Articles of Organization?
- The name of the LLC
- The contact information for the registered agent
- The location of the business
- The name(s) of the organizer filing the paperwork
- The designation of the LLC management structure
- The statement of purpose
Additional Colorado Filing Information — Professional LLCs
The state of Colorado allows some professional service businesses to form a type of LLC known as a Professional Limited Liability Company (PLLC).
Colorado allows the following professions to form a PLLC:
- Physicians/Medical Professionals
- Professional Counselors and Psychologists
- Architects and Land Surveyors
- Social Workers
A few points to consider:
- The PLLC is only allowed to provide services for which the business was formed.
- The members of the PLLC must be licensed in the profession of the business.
- The members of the PLLC are still subject to whichever licensing boards govern their profession.
Step 5: Create an LLC Operating Agreement
When you form an LLC in Colorado, it is good practice to create an LLC Operating Agreement to add structure to your business and project a sense of professionalism.
What is an LLC Operating Agreement?
The LLC Operating Agreement is a legal document that defines the rights and responsibilities of each person involved in the business and explains the details of the LLC’s operating procedures.
Why do I need an LLC Operating Agreement?
Because the LLC Operating Agreement defines the roles of the business’s members and provides direction for daily operations, the document ensures stability and structure to the LLC and reduces future disputes.
Do I need to file the LLC Operating Agreement?
You do not need to file the Operating Agreement with the state; it is for the benefit of your LLC and remains in-house.
What goes into an LLC Operating Agreement?
For the most part, Operating Agreements should include the following information:
- Designation of the members/managers
- Initial capital contributions of the members
- Voting designations and percentages
- Member transfer/addition rules and restrictions
- Distribution of profits
Get a customized LLC Operating Agreement for your small business with Swyft Filings. Find more information here.
Step 6: Obtain an EIN
Most businesses in Colorado must have an EIN. Your Colorado LLC will not be able to conduct business without this ID.
What is an EIN?
The EIN (Employer Identification Number) is a nine-digit number that the IRS uses to identify your business for taxes purposes. The EIN is also known as a Federal Tax ID.
Are all businesses required to have an EIN?
Federal law dictates that certain types of business entities register for an EIN:
- Any business with employees (even if owned by one person)
- Any business with more than one member
- A partnership (LLC or C-corp)
Please Note: A sole proprietorship is not required to have an EIN, but it is still recommended.
Why does my LLC business need an EIN?
The more common reasons you would need an EIN are:
- To hire employees
- To open a bank account in the U.S.
- To file your company’s taxes
- To pay independent contractors
In short, if you make money through your business and it has employees, you must have an EIN.
Is the EIN publicly listed?
The EIN for your LLC will be part of public record.
Can I use my Social Security Number as the EIN?
If you are a sole proprietorship who wants an EIN for your business, you can elect to use your social security number; however, your EIN is part of public record.
Swyft Filings offers EIN services for small businesses in Colorado. Find more information here.
Phase Two: Maintaining Your Colorado LLC
Once you have filed and completed the beginning steps for forming your Colorado LLC, the following part of the process involves getting your company off the ground and functioning. Those next few steps are:
- Step 1: Register for Taxes in Colorado
- Step 2: Apply for Licenses and Permits
- Step 3: File the Periodic Report
- Step 4: Request a Certificate of Good Standing
Step 1: Register for Colorado State Taxes
Colorado does not charge LLCs with a corporate or franchise tax. LLC members are still required to pay state and federal income taxes on their earnings.
State Income Taxes
LLC members/managers are required to pay state income taxes on their net income — the state income tax rate is 4.63%.
Corporate Tax Information
You can also choose to have your LLC taxed as a corporation; if so, you will be responsible for paying the corporate income tax rate on your business’s earnings. Corporations in Colorado must pay a 4.63% corporate income tax.
Additional Tax Information
Other taxes your LLC may need to pay:
- Sales and Use Tax at 2.9%
- Employee Withholding Tax
- Unemployment Tax
Step 2: Obtain Business Licenses and Permits
The licenses and permits required for an LLC in Colorado can vary, depending on a number of variables:
- Location (city and county)
- Type of Business
Tip: If you would like to see more in-depth information on licenses and permits, please feel free to visit the content in our learning library that covers business licenses and permits.
Step 3: File a Periodic Report
All Colorado businesses are required to file a Periodic Report with the Secretary of State.
What is a Periodic Report?
A Periodic Report, also known as an annual report, is a legal form that is filed with the Secretary of State to keep your business’s information current with the state.
What kind of information is in the Periodic Report?
The information in the periodic report is similar to what is in the Articles of Organization:
- The name and address of the business
- The name and address of the registered agent
- The names of the members
- The business’s EIN
Is the periodic report part of public record?
The periodic report filed on behalf of your LLC is a matter of public record.
Due Date: The anniversary month of the LLC’s formation
Frequency: Every year
Implications of Late Filings: $50 late fee and the LLC’s status is changed to “Delinquent”
Swyft Filings helps you stay compliant by providing stress-free solutions. File your periodic report with us today.
Step 4: Obtain a Certificate of Good Standing
After your Colorado LLC has been formed and is ready for business, there is still one last step — getting a Certificate of Good Standing.
What is a Certificate of Good Standing?
The Certificate of Good Standing is an official notification that confirms your business is properly formed and is in compliance with all state regulations.
Who issues the Certificate of Good Standing?
The Certificate of Good Standing is generally issued by the Secretary of State.
When can I request a Certificate of Good Standing for my business?
You will be able to request a Certificate of Good Standing after your LLC is officially formed through the Secretary of State.
Why do I need a Certificate of Good Standing?
Having a Certificate of Good Standing is good for times when businesses and financial institutions request proof that your LLC is in good standing with the state government.
Additionally, some states require foreign LLCs to have a Certificate of Good Standing in place.
Does the Certificate of Good Standing have an expiration date?
The Certificate of Good Standing does not expire/does not need to be renewed.
Swyft Filings can create a Certificate of Good Standing for your [State] LLC. Click here for more information.