Table of Contents
- Step 1: Secure a business name for your LLC
- Step 2: Designate a registered agent
- Step 3: File the Colorado LLC Articles of Organization & Obtain a Certificate of Existence
- Step 4: Prepare an LLC operating agreement
- Step 5: Obtain an EIN (Employer Identification Number) from the IRS
- Costs to set up an LLC in Colorado
- Last Steps
Step 1: Secure a business name for your LLC
Colorado law requires that LLC names comply with its naming requirements, which include:
- The LLC name must include the term or abbreviation “limited liability company,” “LLC,” “Ltd.,” etc.
- The name doesn’t have to be in English so long as it uses English letters and numbers or Roman numerals.
- Names must be distinguishable from all other registered or reserved names in the state.
Name availability search
After you’ve brainstormed and come up with several naming ideas, you’ll have to verify that no other Colorado company is using it.
You have two options to complete a name search online in Colorado.
- Use a name availability search tool on the Colorado Secretary of State (SOS) website:
- It will let you know if a specific name is available.
- It won’t show you similar names.
- Or run a business database search on the same website:
- It won’t show you if a name is available.
- It will display similar names to the name you searched for.
Searching these databases for a few keywords and leaving out the required terms (e.g., LLC) will give you useful results if you’re trying to narrow down your LLC name.
A) Name reservation
After you’ve settled on a name that’s available and meets Colorado’s naming requirements, you can reserve it by submitting an application and paying a $25 fee. You’ll then receive a statement of reservation of name.
Reservations are valid for 120 days and can be renewed for another $25 if you need more time before filing for company formation.
A reserved name is held for your future use. It doesn’t start a business.
Name reservations aren’t required to form your LLC. However, they come in handy when you need to prepare other formation documents or clarify operational details.
B) Trade name
If you decide to conduct business using a name that’s different from your official business name, you’ll need to register a trade name. Sometimes trade names are also called “doing business as,” DBA, or assumed names.
Sole proprietorships use a trade name when they don’t want to use their legal first and last name to do business in Colorado.
And LLCs might want to use a trade name when:
- Its legal name is vague and doesn’t easily identify what the company does (e.g., Rocky Mountain Enterprises, LLC).
- It wants to operate multiple product lines (e.g., a rental real estate company that offers short-term vacation rentals and commercial office space).
In Colorado, trade names aren’t unique. So more than one person can register the same trade name.
Step 2: Appoint a registered agent
Another hugely important step to form your LLC is to appoint your registered agent because you’ll need to include their contact information on your company registration documents.
There’s no fee for this initial appointment, but if you need to change it post-incorporation, the cost is $10. Don’t make this decision lightly because a registered agent is a crucial job with responsibilities such as receiving service of process for important legal and tax notices for your company.
Who can be a registered agent in Colorado?
While the small business owner itself can be the registered agent, that isn’t the only option. In Colorado, a registered agent can be anyone that meets the state’s requirements of:
- Be over age 18
- Have their primary residence in Colorado
- Have a physical address in Colorado (not a P.O. box)
- Be available during regular business hours
If you plan to use a professional service, which is allowed, it must be registered to do business in Colorado.
Professional registered agent service is likely necessary for foreign LLCs. Contrary to what the name may suggest, foreign LLCs are U.S. companies headquartered in a different state. And since foreign LLCs probably don’t have a physical street address in Colorado (at least before incorporation), they’ll need to hire a Colorado company to act as their registered agent.
Hiring a professional registered agent service will cost up to $50-$200 per year, depending on the service package you select.
Step 3: File the Colorado LLC Articles of Organization & Obtain a Certificate of Existence
When you’re ready to form your Colorado LLC, you’ll need to file your Articles of Organization online with the Secretary of State (SOS) to start doing business.
It’s the legal document that creates your company. The cost of forming a domestic Colorado LLC is $50.
Foreign LLCs wishing to register in Colorado will need to file the Foreign Entity Authority Statement and pay a $100 fee.
Colorado has an exhaustive checklist of what you’ll need to file your Articles of Organization, such as:
- LLC name
- Principal office address
- Mailing address
- Registered agent contact information
- Managers of the LLC
- Founders of the LLC with contact details
All new LLCs must be filed online since Colorado no longer accepts paper applications. Payments are accepted by debit/credit cards.
Once your LLC has been approved, business owners should obtain a certificate of existence from the state of Colorado. This document will assist you as your business grows and you have financing, banking, and accounting requirements.
Step 4: Create an LLC operating agreement
Although an operating agreement is not a required part of the state’s formation process, all LLCs should prepare one. This legal document lays out how your company will operate and be managed.
An operating agreement is an essential business document for multi-member LLCs because, without it, you’ll be subject to the default Colorado LLC laws which might not be ideal or in line with your intent.
Operating agreements can be as in-depth as you like but, at a minimum, should include:
- LLC’s name and business address
- Purpose of the company
- Member’s names, contributions, and ownership percentage
- Procedures on how new members are added and how members can leave
- Profit and loss allocation between members
- Management structure
- Process for how the LLC can be dissolved
You can find templates online for free or for a small fee. If you decide to have an attorney prepare a customized agreement, expect to spend $1,000 or more.
Step 5: Get an EIN (Employer Identification Number) from the IRS
Also known as a tax ID number or a Federal Employer Identification Number (FEIN), the EIN is like a social security number for your business. It’s a unique nine-digit identifier that the Internal Revenue Service (IRS) assigns to your business.
The IRS issues an EIN for federal tax purposes. However, local state tax authorities may also require this number when filing for state employment taxes, among others.
The fastest and easiest way to apply for an EIN is to use the IRS website. Although you can apply using a paper Form SS-4, it can take up to eight weeks for the IRS to process your application.
Applying online immediately generates your EIN. And best of all, it’s free.
Costs to set up an LLC in Colorado
There is only one required cost to start an LLC in Colorado: the costs to file your articles of organization. This is only $50 in Colorado, which is less than many other states.
Other optional costs include name reservation ($25), fictional name filing ($20), and professional third-party service (around $100).
Additionally, business owners will be required to pay a $10 Annual Report fee each year, which is far less than in many other states.
After completing the previous steps, there are a few best practices for your LLC. One of them is to open a business bank account, so you can start keeping track of your company finances.
A business bank account is essential to
- Prevent commingling of personal and company funds
- Prove the legitimacy of your business
- Make tax preparation easier
To open an account, you’ll need a copy of your approved Articles of Organization and an EIN if you have employees. You may also need to provide your personal identification (e.g., driver’s license). Another good step is to research whether you will need to register with the Department of Revenue (DOR) to obtain a sales tax license.
Colorado imposes a sales tax on retail sales of goods, but most services are non-taxable. So if you’re opening up a retail store, food truck, or selling anything online, you’ll need to collect sales tax from your customers. You’ll want to obtain your sales tax license before you make your first sale. This license will allow you to make tax payments to the state.
You can quickly apply online, pay the $16 application fee, and make the required $50 deposit through My Biz Colorado.
Sales tax licenses are valid for two years and must be renewed to keep your company in good standing.
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