A limited liability company (or LLC) is one of the easiest business entities to establish and has flexible tax requirements. This makes them a popular choice among future Colorado business owners.
It can be overwhelming to actually go through the legalities and paperwork, especially if this is your first LLC.
Because of this, I have done extensive research on what you need in order to establish an LLC in Colorado.
Top LLC Services for Starting an LLC in Colorado
The easiest part of the process is choosing a name to represent your LLC. It can be even fun. Instead of dealing with paperwork and complicated language, you can let your creativity flow by coming up with a name to represent your business.
This will allow you to visualize your future business and help you create your brand identity.
Before you go any further in the naming process there are some basic legal requirements.
Colorado law requires that LLCs include some indication in their formal names that they are LLCs. You have some options, but you can still customize. The state permits “LLC, L.L.C. ltd.., limited liability company, or limited” as options.
You must also choose a name that is not easily confused with any government agency. It is illegal to use a name that includes “FBI” in any manner. In the same vein certain words, such as doctor or lawyer, will require additional legal documentation.
The list of all these words can be found here. The government wants to ensure that customers don’t go to businesses that falsely advertise such important qualifications.
For inspiration, take a look at your favorite businesses and stores to get ideas. Next, take note of brands that appeal to you and start brainstorming. In no time, you’ll be able to make a few choices for your business name.
How to Start an LLC in Colorado
The most challenging part about starting an LLC in Colorado is the amount of paperwork and legal documentation that you will need to complete the process.
This involves many steps and many forms of paperwork. Apply for your name and get your EIN. Then, submit your Articles of Organization. These are just the basics. You will need to be familiar with taxes once your LLC has been established.
This is overwhelming. There’s so much information. It doesn’t take long to grasp it all or be able to learn it all in one go. It is best to start small and work your way up.
Begin with the simplest tasks like registering for an EIN and applying for an LLC name. Once those tasks are completed, you can move on to more complex tasks. The rest of the steps will be much easier once you have completed the first one.
Step 1: Select a name
It may not seem obvious but a business can’t be a business without a name. You will need a name that complies with the legal requirements to be able to apply for an EIN and open a bank account to advertise.
You can use a whiteboard to help you decide the name of your company. It’s not easy to do, but it is possible.
Writing as many words about your business as possible is a great way to get started. Let’s suppose you are looking to open a coffee shop. You might use the words roaster, coffee, cup, java, and caffeine to describe your business.
Once you have the words flowing, think of a few ideas for your name. Keep it simple, short, and easy to remember. You can also search online for business name generators if you are still having difficulty. You can find many free resources online that could help you get inspired if you are stuck.
After you have chosen a few names you like, be sure to verify if they are still available. Colorado has strict requirements that each business must have a unique name to avoid confusion.
To check if yours is still available, go to the Business Database search website of the Colorado Secretary-of-State and type in the names that you are interested in.
You can change the order of words if your business names are already taken. If you want to open a coffee shop called Kate’s Coffee Roasters then consider changing it to Coffee Roasting By Kate.
Check to see if your domain name is available. Although it is not legally required, I highly recommend it. A website is essential in this digital age.
This is a great way to build trust with your customers, establish credibility and allow them to buy products. You can check if the name that you are looking for is available on GoDaddy’s Domain Name Search.
You might also consider checking if your business name appears on different social media platforms like Instagram, Facebook, and Twitter. It is important to maintain brand continuity. Therefore, it would be a good idea to use the same name for each platform.
You can submit a Statement of Revision if you aren’t sure if you want to commit to a particular name for at least 120 days. This does however require $25 in filing fees.
Apply for an EIN
While it won’t be part of your actual business name, an EIN will still be vital to your company’s identity. Your LLC is like a baby. First, give your LLC a name. Next, ensure it has a social safety number and a birth record. This is what an EIN does.
Your EIN serves as proof that your business exists. EIN is required to open a bank account, apply in the government for a license, file tax returns, and apply for traditional loans. This should be the first thing you do when you start your LLC.
Step 2: Select a registered agent
Every LLC in Colorado must have a registered agent. You’ll want to start the process of looking for one as soon as you can.
Learn the requirements for a registered agent
A registered agent’s main responsibility is to accept legal mail on behalf of your business. Your registered agent is the primary point of contact between you and the Colorado Secretary-of-State office.
In the event of Service of Process (SOP), it is important that your registered agent be available during normal business hours. SOP covers all legal documents such as summons, complaints, subpoenas, and complaints. There could be legal problems if your registered agent is unavailable.
Take a look at your options
There are many options available to you when choosing your registered agent due to legal requirements.
You have the option to become your own registered agent. This is a good option, but it comes with some risks.
If you receive an SOP, but you aren’t there, it would be possible for a court case. The same applies if your registered agent was a family member, friend, or employee.
You can also hire a Colorado-based registered agency company to handle this for you if you don’t wish to worry. The company will be able to collect any SOPs at all times. The only problem with this option is its cost. A registered agent company may cost between $50-500 per year.
Step 3: Fill out your Articles of Organization
The law also requires that you file an Articles of Organization with the Colorado Secretary of State. You can find the exact guidelines online. We will only review some of the most important sections.
Publicize your addresses
Addresses are one of the most important pieces you’ll need to include in your document. You will need to clarify which addresses are appropriate for different situations. You will first need to determine your primary office address.
This will be your main address. This information will be available online so it is important to remember that your home address will also be visible.
You will then need to publish your shipping address. This can be the same address as your principal office. Your Registered Agent’s address must be in Colorado. You will also need their mailing address. Each person involved in filing Articles of Organization must also list their address.
Register Agent Consent
For your Articles of Organization, your Registered Agent will need to provide some information. As I have mentioned, your Registered Agent will need to provide you with a mailing address and a business address. Colorado must be the business address.
They must also consent to take on the responsibility of your business in accordance with the Articles of Organization.
This document also contains a description of your LLC’s management structure. Two options are available in the Colorado Secretary of State outline of Articles of Organization for applicants.
You can choose to have your LLC run by managers who are specially chosen. This means that only a few members of your LLC will participate in the daily management tasks. They will make daily decisions for the company.
Another option is to set up a member-managed LLC. This type would give each member of the company managerial duties. The decision-making process would be open to all members.
It also states that “Where there’s a dispute the vote of the majority generally rules while extraordinary actions require unanimous approval.” Take some time to think about the structure of your business.
Step 4: Create your Operating Agreement
Although Colorado doesn’t require an operating agreement at the moment, there are many advantages to having one. This document will outline the legal rules and regulations of a company’s financial operations.
Form your agreement
Before you begin the writing process, think about what information you should include in your agreement. The following information is included in most operating agreements.
- Each member of the company’s staff will be identified and their address.
- Your business’s purpose
- How each employee will be evaluated and what their roles are
- How ownership is distributed
- How profit is distributed
- How will members of the company be added or removed?
- How would you approach the dissolution or transfer of your company?
These questions can be copied to a blank document and filled out before you begin the process of creating your first draft.
The Operating Agreement should be written
When it comes to creating an operating agreement, there are many options. There is no need to format the operating agreement, provided it is legible.
Don’t forget to make sure that all members of your LLC have read and signed the document. Everybody should be able to understand the business’s processes and standards from the very beginning.
Step 5: Learn about the annual LLC requirements
Although all legal requirements for registering your business are covered, it is important to consider what the future holds for your LLC.
Colorado LLCs must file a report each year. This report will include any updates regarding your business address and mailing address, registered agent’s addresses, and any filing individual’s addresses.
This is essential to make sure that anyone who needs to contact you can find your information easily.
You can file your annual report anytime during the three-month period. If you start your business in January, you must file your taxes between January 15 and April 1.
You can also submit it here for $10
To maintain your legality, credibility, and financial stability, it is important to pay your taxes on time. There are three types of taxes that you might need to file.
The business income tax is the first. The Colorado business income tax applies to 100% of your income if you operate your business in Colorado. If your business is located in multiple states, you will need to divide your taxes accordingly.
A second type of tax will be required if you have employees in your LLC. These taxes are known as withholding taxes. This basically means that you will take a portion of the paychecks of your employees and send it to the government.
The last item is the sales tax. You will most likely have customers from Colorado buying your products. You will need to collect sales tax and send the money to Colorado every month, quarter, and year.
There are other types of taxes that are less popular, like fuel and excise taxes and severance taxes. The Colorado tax website has more information.
Business808, a renowned consulting organization that aids startups in scaling and growing, is led by Andy Brooks as Editor-in-Chief.
Andy has over 12 years of consulting experience and is a pro at creating and managing profitable businesses. He has experience working with several LLCs and Registered Agent services and has a degree in business management. He has assisted clients in achieving their objectives.
In addition to writing for Business808, Andy is a well-known author and speaker, and an active contributor to several online business publications, imparting his knowledge on how to grow an LLC.