How to set up an LLC in Colorado
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Published 6:40 a.m. ET Aug. 3, 2023
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According to Colorado’s Secretary of State, there has been a record number of new business entity filings in the first quarter of 2023, going up year over year by 27.6%. If you want to join these entrepreneurs, typically the first step is filing an LLC, or limited liability company. This business entity can help protect your personal assets from your business dealings. The following guide will walk you through starting an LLC in Colorado.
8 steps to start an LLC in Colorado
1. Confirm your LLC business name
Before you form your LLC, you must decide on a business name. Colorado requires all business entities to have a name that is different from the names of any other business in Colorado. You also need to include either “Limited Liability Company” or an abbreviation, such as “LLC” or “Limited Liability Co.” in the name.
To determine if the name you want to use is already taken, use Colorado’s name availability search or business database search tool. These tools will show you other Colorado businesses that may be using your name or a similar one. If you find the name you chose is already in use, you can “distinguish” it to make it acceptable for use by:
- Adding articles of speech, such as “the” or “a.”
- Using a different abbreviation for “limited liability company” in the name. For example, change “ABC LLC” to “ABC Limited Liability Company.”
- Adding certain punctuation, such as parentheses or hyphens. For example, you can distinguish “ABC LLC” by changing it to “(ABC) LLC” or “A-B-C LLC.”
- Adding spaces. For example, “A B C” is not the same as “ABC” in a name.
Keep in mind, though, that the following changes will not make two names legally unique:
- The addition of commas, periods or underscores.
- Changing letters from uppercase to lowercase or vice versa.
Also keep in mind that certain words cannot be used in a Colorado LLC name. For example, you cannot use words that denote your LLC as a government agency, such as state department, treasury or FBI. In addition, some LLCs must obtain licenses to operate, such as banks or legal firms. To use related terms in your LLC name, you must obtain the required license(s).
It is also smart to check that your LLC name is not protected federally from infringement. To do so, use the United States Patent and Trademark Office’s search trademark database. If your chosen name appears in this database, you must change it by law.
Finally, to ensure your LLC’s marketability, search online for the social media handle and domain name version of your LLC name to ensure it is not already being used by another company. Once you have landed on a name, to ensure it is not taken before you set up your LLC, it is a good idea to also purchase or set up profiles under those names. For example, if your company’s unique LLC name is “Lynchburg Celtic Shop, LLC,” consider buying www.lynchburgcelticshop.com and setting up social media profiles with the name.
The Colorado Secretary of State allows you to reserve a business name for up to 120 days, a useful option if you won’t be legally forming your LLC immediately. To do so, file the form “statement of reservation of name” on the Colorado Secretary of State website and pay the $25 filing fee. To fill out the form, you will need to provide the applicant’s name, contact information and the LLC name being reserved.
2. Choose your registered agent
Colorado requires you to designate a registered agent for your LLC. A registered agent is a person or entity that is available during regular local business hours to receive legal or state documents on your LLC’s behalf. Their role is also to notify responsible parties of these documents so they may address them in a timely manner. You can serve as your LLC’s registered agent, appoint your LLC or another person to serve as your agent or hire a registered agent service provider.
If you select an individual, this person needs to be at least 18 years old and reside in Colorado. If you hire a registered agent provider, the company needs to have a physical business address in Colorado and have legal authority to conduct business in the state.
Many companies hire a registered agent service. The benefits of doing so include:
- Greater privacy: The address of your appointed registered agent will be published in public registered agent databases. Appointing a registered agent service means their address will be published instead of yours.
- Compliance assistance: Many registered agent service providers offer an online portal with calendars and alerts that help you stay ahead of key document-related deadlines for your LLC, such as when your annual report is due or if a document has not been addressed in a timely manner.
- Schedule flexibility: Many LLC members cannot be present at their place of business during all regular business hours. They may need to take time off work, travel for business or perform field service. Appointing a third-party provider means they have to be present at the listed registered agent address instead of you, giving you more flexibility to conduct business or take care of needs as appropriate.
- Reputation management: When your entity or someone within it serves as your LLC’s registered agent, embarrassing paperwork, such as notices your LLC is being sued, could be delivered to your business in front of customers or employees. Hiring a third-party registered agent sends those notices elsewhere, after which you receive a discreet email or other form of communication alerting you to them.
A registered agent service provider plan costs between $0 and $300, depending on the provider’s bundled-service deals, plan features and policies. Before you consider hiring a registered agent service provider, shop around to find one that best suits your needs. Use our best registered agent services guide to help you decide.
Once you’ve chosen a registered agent, get written permission to appoint that person or entity as your registered agent and keep that document with your business records.
3. File your LLC’s articles of incorporation
To officially set up an LLC in Colorado, file an articles of incorporation form online on the Colorado Secretary of State website. Once you access the form, scroll down and click “next” to get started. Then, provide the following information to complete the application:
- Your LLC’s name.
- Your business’s physical and mailing address.
- Your registered agent’s information, including their physical address, mailing address and signature.
- Your LLC members’ names and contact information.
- The LLC’s management structure (i.e., managed by members or managers).
- The name and address of the person forming the LLC.
- The applicant’s name and address.
- The effective date of your LLC formation (if you don’t record a specific date, your LLC’s formation will be effective immediately).
Pay the $50 filing fee either by credit card, debit card or your Colorado Secretary of State prepaid account. Once you submit your application, you will be assigned an ID number. You can print out a record of your articles of incorporation by searching the business database for your LLC’s name or ID number on the Colorado Secretary of State’s website. Keep this document with all of your important business documents.
4. Sign up for an (optional) secure business filing account
Once you’ve submitted your LLC formation form, you will be given the option to sign up for a secure business filing account via a link on the confirmation page. Creating this account will allow you to control who is able to file and make changes to your business record on your business’s behalf, helping to curb identity theft. Click “set up a secure business filing,” then fill out the form with your name, business address, email and a chosen password. Click “submit.”
All you need is to provide your email address and password. Then, use those credentials to sign in each time you want to file a business document or access one that has already been filed. You can also give access to other users (like a trusted employee or your registered agent) by creating authorized user accounts.
Once you’ve set up an account, you will receive a PIN in a document sent to you via traditional mail. Use that PIN to sign back into your account, then follow the prompts to finalize your account setup.
5. Create an operating agreement
An operating agreement is a legally-binding document that outlines your LLC’s operating rules and procedures. Once drafted and finalized, all of your LLC members should sign it as an agreement to adhere to its contents.
An operating agreement serves several purposes, including:
- Limited liability protection: By outlining your members’ ownership percentages and confirming your entity’s limited liability structure, an operating agreement helps to protect members’ personal assets if the LLC is sued.
- Dispute prevention: By outlining your operating procedures,rules and your members’ rights and responsibilities, you create clarity around your LLC that helps to prevent confusion and disagreements between members down the line.
- Dispute resolution assistance: Should a dispute arise between your LLC’s members, the clear and agreed-upon guidelines within your LLC can help you resolve it. It can, for example, offer guidance on how to vote to settle on a decision or clear up confusion that led to the dispute.
- Operational control: As a legally-binding foundation that outlines your LLC’s operating rules and procedures, this document overrides default state LLC operating rules that may be contrary to your LLC’s needs or its members’ operational wishes.
Your LLC operating agreement should include the following information:
- Your LLC’s name and contact information.
- The rights and obligations of your LLC’s members.
- Members’ ownership percentages.
- How the LLC can be dissolved.
- How members can buy out the ownership percentage of another member.
- The accounting method the LLC will use (accrual or cash, for example).
- How profits and losses will be distributed.
- How and when member meetings will be held.
You can draft an operating agreement for free by accessing a template from some LLC formation service websites, such as Rocket Lawyer and Northwest Registered Agent. Some, like Rocket Lawyer, will even ask you questions and fill out the form for you.
However, as a legally-binding document that should serve the unique needs of your LLC, we strongly recommend consulting with a business lawyer before your members sign the agreement. Such consultation services are available through Rocket Lawyer, Northwest Registered Agent and LegalZoom.
6. Obtain an employer identification number (EIN)
An employer identification number (EIN) is a number that identifies your LLC for tax administration purposes, much like a Social Security number does a person. It is also necessary for completing many financial-related business tasks, such as opening a bank account and hiring employees. Obtaining an EIN is a quick and free process.
Visit the IRS’s apply for an employer identification number (EIN) online page. Scroll down to below the fold and click “apply online now.” On the next screen, read the instructions and click “begin application.” To fill out the form, in one sitting between the hours of Monday and Friday, 7 a.m. to 10 p.m. Eastern Standard Time, provide the following information:
- Your LLC’s name.
- Your business type (i.e., limited liability company).
- Your LLC’s address.
- Your name and Social Security number (or that of a controlling member of your LLC).
Once you have submitted the form, you will immediately receive a confirmation document with your assigned EIN. Print this document and keep it with your other important LLC documents.
7. Obtain necessary business license(s) or permit(s)
While Colorado does not have a blanket business license all businesses must obtain to operate their LLCs, it does have industry-specific licenses or permits. For example, many LLCs must obtain a sales tax license. This license is necessary for businesses that sell tangible property. Service companies need not apply. This license requires between a varying fee, most recently between $4 and $16, depending on when you file. For example, from July through December of 2023, the fee is $4 but if you filed from January through June of 2023, it would have been $8.00.
To apply for the license, fill out form CR 0100 AP Colorado sales tax withholding application. You can apply online by visiting the MyBizColorado page. Click “start” and follow the prompts to complete the form. You need the following information to apply:
- The reason you are filing the form (“original application for a new business”, for example).
- Your business type (i.e., limited liability company).
- Your name, contact number and Social Security number.
- Your business name.
- Your LLC’s EIN.
- Proof of your identity, such as a copy of your passport or state ID.
- Your business’s physical and mailing address.
- The names, Social Security numbers, job titles and contact information of your LLC’s members, partners, owners or officers.
- If applicable, the type of sales company you are (wholesaler, retail-sales or charitable, for example).
- How often you file sales taxes (if applicable).
- Answers to questions about what you sell, such as if you sell alcohol, tobacco, rooms for rent or if you are a marketplace facilitator.
- Whether you engage in W-2, 1099 or other types of withholdings.
- Your signature and job title.
- Credit or debit card information to pay the applicable filing fees.
As you fill out the form, if it is also necessary for you to obtain a wholesale license, you will have the opportunity to apply for one and pay the filing fee.
Check with your local county or city clerk to determine if other licenses are required for you to operate your LLC. In addition, visit the Colorado Department of Regulatory Agencies (DORA) to determine if industry-specific licenses are required for your LLC. Each license is likely to come with a filing fee, which will vary depending on the license type.
8. Submit your annual periodic report.
While most states require you to submit an annual report to ensure all information on your LLC is up to date in the state’s system and to the public, Colorado requires you to submit what it calls a “periodic report” with the secretary of state each year. Filing this report ensures your business information is up to date and that your LLC remains in good standing.
You will receive a notification by mail when your periodic report’s due date is approaching. You must file a periodic report online on the Colorado Secretary of State website. To do so, first select “business, trademarks, trade names,” then “search business database” on the next page. Search for your business name and select “file a form.” Finally, select “periodic report” on the “documents available for filing” page. Review the pre-filled information to ensure accuracy before paying the $10 fee and submitting the form. If filing the form late, you will have to pay a $50 fee.
Find the best LLC services in Colorado: Best LLC services of 2023
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Even if you set up an LLC yourself, you must pay a $50 filing fee to the Colorado Secretary of State. If you want to reserve a business name, it will cost an additional $25. Depending on your LLC’s needs, you may also have to pay other expenses, such as legal consultation costs, an annual fee for registered agent services and permit and license fees, all costs that vary.
LLCs are pass-through entities, meaning taxes are passed through the LLC to its individual members who must pay taxes on their personal income tax returns based on their percentage of ownership. So, though Colorado LLCs do not pay taxes on earnings, its members do on both the state and federal level.
Yes, your Colorado LLC needs a registered agent. It can serve as its own registered agent or you can appoint an individual or hire a registered agent service provider. Regardless of your choice, your registered agent will need a physical address in the state and must be available during all regular local business hours to receive legal and other correspondence on the LLC’s behalf.
To find a registered agent that can best meet your LLC’s needs, read our best registered agent services guide.
Colorado LLCs need to file a periodic report, similar to an annual report each calendar year. Its purpose is to update your business information for the state and the public. It can be submitted online on the Colorado Secretary of State website by clicking “business, trademarks and trade names,” searching the database for your business name and following the prompts to fill out the form. You must pay a $10 filing fee to submit the form.
You will need to file a Statement of Dissolution to dissolve your LLC in Colorado. You can file it electronically on the Colorado Secretary of State website by first searching for your business on the state’s online business database. Once there, select the correct form to file and fill in all relevant information. There is a $10 fee to file the form. Remember to also review your legally-binding LLC operating agreement and follow its dissolution steps and rules.
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