How to Start an LLC in Colorado
Starting a new company involves many important steps, but one of the most important is to properly form the business entity (LLC, corporation, etc.) Limited liability companies, or LLCs, are quite popular among entrepreneurs, as they are relatively simple, but still provide great liability protection in the case of a lawsuit. For entrepreneurs in Colorado, the requirements to start an LLC are fairly straightforward, but it’s still helpful to follow a guide.
Fortunately, this is just the guide you need! In this article, we will discuss how to start an LLC in Colorado from start to finish.
In CO, the process of forming new companies is handled by the Secretary of State. Entrepreneurs can use the downloadable forms and online filing tools listed here. Alternatively, the MyBizColorado platform provides a slick alternative.
If you’ve decided to start a limited liability company in Colorado, the steps below provide a detailed breakdown of what you’ll need to accomplish.
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Consider using an LLC service
You can complete the necessary steps to form a limited liability company on your own. However, it’s much easier, and often quicker, to use an LLC service.
LLC services, such as ZenBusiness and Northwest Registered Agent can walk you through the process of setting up your new company. They make it easier than going directly through the Secretary of State, and they essentially serve as a middleman between you and Colorado’s state government.
Several services also bundle other useful features and services together. For instance, both ZenBusiness and Northwest Registered Agent can be your Colorado Agent for Service of Process (which is called a Registered Agent in most states). This is a requirement in Colorado, and both of these services make it quite easy to meet this requirement.
Services like ZenBusiness start at just $49 (plus Colorado’s state fee), so it’s not a big investment to make. If you’d like to save some time and ensure accuracy, we recommend using an LLC formation service.
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Choose a business name
The first concrete step you’ll need to take is naming your new company. You will need to find a name that’s available, meaning one that isn’t already in use by another company in Colorado. To do this, you can use the Business Database Search on the CO Secretary of State’s website.
Your business name will need to meet certain requirements, including:
- It must contain “limited liability company”, or one of its abbreviations, such as “LLC”, “L.L.C.”, etc.
- The name must be distinguishable from other companies in the state of Colorado
- Certain words are restricted or require special permits (like “Doctor”, “Lawyer”, etc.)
Once you find a name you like that’s available, you can reserve it by filing a Statement of Reservation of Name at this link. This is not strictly necessary if you plan to register soon – but if there will be a delay, this will reserve the name for 120 days.
Using a trade name in Colorado
You may stress about finding the perfect name for your LLC, but this is not necessary. Businesses are allowed to use what are called “trade names”, also known as “doing business as” names or DBAs. A trade name is an alternative name that you can legally do business under, so long as you register it first. For example, “Denver Automotive, LLC” could hold trade names for “Denver Collision Repair” and “Denver Subaru Specialists”, if those names were available.
To file for a trade name, you must file the Statement of Trade Name of a Reporting Entity with the Secretary of State. This can also be done online here.
Appoint a Colorado registered agent
Every business in Colorado needs what is called an “agent for service of process”. In most other states, this is referred to as a “registered agent”. This agent needs to be either an individual living in Colorado or a business licensed to operate in Colorado. The agent is tasked with being the point of contact for your business, by accepting legal correspondence, a notice of lawsuits, etc.
You can be your own registered agent (as long as you live in Colorado and have a physical mailing address there), or you can appoint an employee. However, keep in mind that the address of the registered agent will become a public record – so privacy may be a concern for individuals.
The alternative is to use a registered agent service. ZenBusiness and Northwest Registered Agent are good options. It costs $125/year, and they will handle all correspondence for you, ensuring everything is handled efficiently. They can also handle mail forwarding. Although ZenBusiness only offers registered agent service for existing clients (who have started their LLC through ZenBusiness).
Prepare an operating agreement (optional)
Note: This is an optional step. An operating agreement does not need to be submitted to the state of Colorado, or any other government agency. It’s an internal document for your own use.
You don’t necessarily need an operating agreement, but most businesses should still have one. It’s particularly important for companies with more than one owner.
An operating agreement lays out key details about your new company. Crucially, it establishes the ownership structure. It is a legal document that, if signed by all parties, will help to prevent ownership disputes in the future.
You can draft an operating agreement with the help of a lawyer or paralegal. Alternatively, services like ZenBusiness offer operating agreement templates which you can use to draft an agreement on your own.
File Articles of Organization
The Articles of Organization (found here) are the main set of forms that are required to actually establish an LLC in Colorado. This document lists all the pertinent information about your new company, including its purpose, name, address, registered agent information, manager/member management status, and more.
The fee for filing the Articles of Organization is $50. It can be submitted online by finding the form on this list. Most states have much higher fees, so Colorado’s low $50 LLC cost is welcome for small businesses!
Wait for your documents
Once you have submitted the Articles of Organization, you will need to wait for Colorado to process the documents. The Secretary of State’s office is known for being fairly efficient in their processing times. Generally, new business applications are processed in 5-7 business days. Expedited processing may also be available, for an additional fee.
Apply for an EIN
An EIN, or Employer Identification Number, is a federal tax identification number issued by the IRS. It’s used for federal tax purposes, and it’s required to hire employees. Even if you don’t plan to hire employees, it’s still a useful ID to have.
Fortunately, EINs are easy to get – and free. You can file for one online on the IRS website. It will take just a few minutes to apply, and there is no cost at all. Once you have your EIN, you’ll be able to hire employees, open business bank accounts, and more.
Apply for business licenses, permits, etc.
The steps above will help you form an LLC; but there are other permits and licenses that you will likely need. The Articles of Organization are the main state-level requirement, but various other requirements will need to be met on the local level (city/county). For example, most businesses will need to obtain business licenses in the city or county where they plan to operate. You’ll need to check with the local government in your area to see the next steps.
Some businesses will also need specialized permits or licenses. For example, your company may need a liquor license if you plan to operate a bar or restaurant. Again, these are handled on a local level.
Keep your company in good standing
There are many ongoing requirements to stay on top of, as well. You’ll need to satisfy various requirements in order to keep your business in good standing with state, local, and federal agencies. Here are a few things to keep in mind:
- Colorado Periodic Reports (due annually)
- State tax returns with the Colorado Department of Revenue
- Annual federal tax reports
- Annual city/county tax reports in some areas
- Employer taxes, including payroll tax returns
- State sales tax and use tax returns
- Renewal of business licenses and permits
- Quarterly estimated taxes
- An ongoing elected Agent for Service of Process (registered agent)
For a new business owner, this can all seem somewhat overwhelming. However, it’s best to tackle things from day one, instead of falling behind. We recommend researching all the requirements that you’ll need to satisfy now, and building a list for your own reference. You can also set calendar reminders for yourself so that you never miss a key date.
Alternatively, services like ZenBusiness can help with many of these ongoing requirements. If you use ZenBusiness to start your LLC, their convenient dashboard will help remind you of upcoming filings and reports that you’ll need to complete – and they may be able to help you with some of them. You can certainly do everything on your own, but it’s definitely beneficial to have some help!
About BOI Reports…
To legally operate an LLC, owners need to understand BOI reporting laws from the Corporate Transparency Act and provide accurate owner details to the Financial Crimes Enforcement Network (FinCEN) to avoid penalties. Find out more about BOI reporting here.
Open a business bank account
It’s very important to keep your personal finances separate from your business finances. The best way to do this is to open a business bank account immediately and use it exclusively for all business-related expenses.
You’ll need an EIN, business license, and other information about your company in order to open a bank account. Most financial institutions offer business checking accounts, so shop around to find a good fit in your area.
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