Think about initiating an enterprise in Colorado? Overall, this state is a good place to the business waters. Colorado welcomes smaller ventures and startups creating favorable conditions for their scale-up. The best opportunities pop up in the fitness industry, daycare services, digital marketing, leisure, and party services.
Manageable taxation and state regulations, improving capital raising opportunities, supportive and collaborative business environment are inspiring, make first-time entrepreneurs feel more confident and push them to success.
At the same time, launching any sort of venture is never easy. It’s a multi-stage process with a number of challenges and issues you’ll have to tackle on the way. Yet, there is one task we can make easier for you. It’s Colorado LLC registration to set up a legal framework for your future enterprise.
Though a filing procedure is relatively simple, LLC laws are state-specific and might entail certain nuances and details. Besides, it’s always nice to have a comprehensive guide at hand when getting into formalities.
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While creating an LLC in Colorado is technically about registering the LLC statute with the state, full-scale formation and getting your venture off the ground is more than that. So, we’ll take you through compulsory and formal steps and provide some helpful tips and recommendations on your post-formation moves. Let’s dig in.
It’s a step that many first-timers disregard or don’t take seriously. However, it’s an important one that should be duly completed so that you could proceed without a problem.
Unlike non-incorporated entities, LLCs are not necessarily named after their owners. In fact, an LLC allows for nearly any moniker you invent. At the same time, each state has its own statutory regulations and requirements concerning registered business names. Hence, it’s advisable that you check them before inventing a moniker for your future venture.
In Colorado, rules for naming business entities are set forth in State Statute 7-90-601 C.R.S.
By and large, you can unleash your creativity and use your imagination to the best. Yet, there are a few terms and restrictions to observe.
To start with formalities, the entity name should contain the term “limited liability company” either in a full or abbreviated form such as “Ltd.”, “LLC”, “limited”, etc. to clearly show what type of entity your company belongs to and avert any possible confusion.
The name of your future enterprise should not be misleading and refer to any type of activity you are not allowed to perform. Thus, such words as “trust”, “bank”, “insurance”, “indemnity”, “guarantee,” and alike are strictly banned unless you have special permission from an appropriate authority to deliver certain services or functions.
Likewise, you can’t use any words related to government, public, or educational institutions (“college”, “university”, “treasury”) unless your entity is lawfully authorized to provide specific services or perform specific activities.
When it comes to mentioning professions and any specialty jobs in LLC names, you should be careful with those as well. Unless you form a professional LLC in Colorado and have a required professional license, you are not entitled to use those words in the business moniker.
Other prohibited words that can’t appear in legal business names are offensive, rude, insulting, and abusive words and words rendering racism, intolerance, political incorrectness, or aggression.
Last but not least, the strictest requirement for an LLC name is that it should be unique, i.e. distinguishable from other entity names already registered in the state of Colorado. Should your LLC name fail to be different, your filing application will be rejected by the state.
Once you have some company name version on your mind, don’t rush into filing your LLC statutes. Take your time to explore the name alternatives and check their availability. Speaking of which, it’s not enough to observe all the statutory naming requirements. You should check if the chosen variant can be lawfully used in the state of Colorado. That’s why you’d better come up with a few name versions.
To monitor the name availability in Colorado, you could refer to a free digital name search tool on the Secretary of State’s website. You’ll be able to simply enter the moniker and see if you can snatch it for your Colorado LLC in a minute. Besides, there are more helpful search tools that will let you scrutinize the state business base and discern the companies with names similar to the one you have in mind, and navigate through the trademark database if you do have plans to trademark some of your company’s legal attributes in the future.
A name check will guarantee your chosen enterprise name will be further accepted by the state and your filing order won’t be declined due to an incorrect name. To ensure, you’ll hit the spot from the first try and create a distinguishable moniker, we’ve made quick tips on how to make your business name unique:
Your entity name that will be registered with the state is a so-called legal name that becomes one of the legal attributes of your enterprise. Yet, if it’s not the one you initially wanted, you are free to introduce your LLC under a different name to the market.
A DBA (doing business as) is a fictitious, assumed, or trade name that is usually used for marketing purposes. In contrast to a single registered moniker, you can have multiple DBAs to catch up with the changing business environment, your enterprise growth, or your entrepreneurial ideas and endeavors.
DBAs allow nesting several brands and independently running different types of activities under the roof of the same LLC saving you the need to multiply legal entities.
Similar to LLCs, fictitious names require state filing. However, the whole process is quicker and less formal since you already have a formed entity. When registering a fictitious name, you can omit an “LLC” tag, which is mandatory for a legal name. Your company name will be more appropriate for a brand or logo and simply sound nicer
A DBA filing fee in Colorado is $20 per single name version. To keep your DBA active and eligible, you’ll have to renew it on an annual basis.
It’s yet another requirement to match before you can proceed to file your LLC foundation documents. You won’t be able to start an LLC without a registered agent in Colorado. This role is uniform across the states. It serves as a link between your entity and the outer world by handling your legal mail, i.e. letters, notifications, requests, legal notices, and filing docs addressed by public and governmental agencies and institutions to your LLC.
In Colorado, any adult individual over 18 years of age or an entity registered in the state could fulfill this function. The main rule is that your mail-handling rep should have a physical Colorado address and should be able to be consistently present under that address on weekdays from 9 a.m. to 5 p.m. to personally receive your LLC mail.
You can appoint only one person or entity as your mailing rep, and an agent should confirm their consent to fulfilling this role by signing a special form that should be attached to your LLC statute. Notably, a Secretary of State cannot be your representative agent like in some other states.
Overall, you can pick any random person for this role, be it your friend, neighbor, family member, or colleague. You can even be your own registered agent. Though this function seems pretty formal, it’s quite important since it’s your agent who will receive all official documents on behalf of your company including legal requests, lawsuit notifications, and court summons.
As such, an agent will stand on guard of your good standing status keeping an eye on your filing schedule and making sure you catch up with that.
Many beginner entrepreneurs reserve this function for themselves for the following reasons:
By way of contrast, though, hiring a third party to complete the agent’s work brings a lot more benefits than you can imagine that altogether outweigh the above-mentioned arguments for serving your own mailing rep:
With that, delegating an agent’s job does seem a wise decision. And to get the best out of those benefits, we recommend setting your eyes on a dedicated agent service. With a professional rep on your side, you’ll save the peace of mind and won’t have to worry about mistakes, errors, or mishandling.
At the cost of about $100-150 per annum, a representative service won’t hit your budget too much and have you set on one of the most important LLC issues. Besides, the majority of dedicated services are national and will have your needs covered in any state should you decide to expand your activity to another state at some point.
At the stage of forming an LLC in Colorado, your filing will be simply declined by the state without an appointed agent.
Maintaining an active mailing rep further on is also a must since you’ll have to confirm the agent’s data on your Colorado LLC annual reports and register amendments to the LLC statute, should you change the agent on the way.
Finally, by running your entity without a mail-handling rep for some time, you should be aware of the following risks:
When the chosen LLC name is checked and a representative agent is appointed, you are ready to finalize your LLC formation in Colorado by registering the foundation documents with the state.
An LLC statute or the Articles of Organization is a document that officially brings your legal entity to life and activates all the legal benefits related to it, i.e. the corporate veil protection and flexible tax options. Once the document is approved and signed by the Secretary of State, your LLC is considered to be fully eligible and your company data appear in all the appropriate business and state registries.
By form, the statute is a simple and generic doc covering basic company info. At the same time, each state has its own statutory regulations, and the document content might vary in some details.
In this US state, the LLC Articles of Organization should be compiled and submitted by sticking to paragraphs 7-90-301 and 7-80-204 of the Colorado Revised Statutes. The info to be included in your LLC statute is as follows:
Colorado is one of the states that feature by far the simplest LLC registration procedure. Just make sure you have all the above-mentioned info at hand to fill out the document and follow three easy steps:
To get your Colorado LLC statute filed, you’ll have to pay a $50 state fee before submitting an online form. The best thing is, though, that your docs will be approved immediately. No need to wait for days or weeks as in many other states. Then, you’ll be able to print out your verified Colorado Articles of Organization or save them to your personal storage on the Secretary of State’s platform.
First and foremost, an Operating Agreement is a company bylaw. As such, it’s a legal requirement in only 5 states including New York, California, Main, Missouri, and Delaware. In the rest of the US states, it’s not required by law.
Though Colorado makes it optional too, it’s advisable that you have this instrument in place. There are a few solid reasons for that:
In contrast to an LLC statute, an Agreement is a bylaw that needs no state filing. It’s enforced by being signed by the LLC members and should be stored along with other important business papers.
As such, an Operating Agreement has no strict form and could cover any points and info the company owners consider necessary. You can find a number of ready-made templates for this instrument online or even hire an attorney to tailor a customized document if you have a complex business scenario or ambitious scale-up plans.
To give you an idea of what to be included in an Operating Agreement, here are the most common provisions it normally embraces:
The role of this document for your Colorado LLC control and management should not be underestimated. Take your time to draft an Agreement at the formation stage and you’ll reap a lot more benefits in the long-term perspective.
When your LLC is formed in Colorado, it will be assigned a unique registration number by the state. Yet, it’s not your federal tax ID number that you should get to identify your newly formed entity as a taxpayer in the US.
A federal tax ID or an Employer Identification Number (EIN) is issued by the Internal Revenue Service for free. To get it, it’s enough to file an application form online that will take you no more than 5 minutes. And you’ll receive your number in another 5 minutes.
To be clear, an EIN is not a compulsory prerequisite for LLC formation in Colorado. In fact, you can only get it for a registered legal entity. More than that, for single-member LLCs, this tax code is not a requirement, they often choose to use the Social Security Numbers of their owner for tax purposes.
However, multi-member LLC should receive the federal ID anyway. And irrespective of the number of co-owners, you’ll need it for your LLC in the following situations:
Given how easy and quick it is to get an EIN, you won’t have to pay anyone for this service and can do it on your own without a hassle.
Formally, the cost of creating an LLC in Colorado is a compulsory state fee you’ll have to pay to the state office to review and approve your LLC statute. This fee varies across the states and can fall anywhere between $40 and $500.
Colorado is one of the states that stands at a lower end of the price range, with a filing fee of $50. Ensuring immediate document approval, the state has no added charges for speedy filing, and online filing entails no extra service or mailing costs.
However, should you hire an attorney or a professional service to help you open an LLC in Colorado, you’ll have to add the cost of service to the above filing fee. Besides, engaging a professional registered agent will also come at a cost that will further bump up your formation-related expenses.
As a result, depending on the chosen services and their prices, the final Colorado LLC formation cost could range from $50 if you handle everything on your own to about $200 if you decide to get some baseline assistance.
The formation stage is over and your LLC is ready to move forward, right? Well, it’s not quite so. You’ve already given your enterprise the right start by creating a legal structure for it. However, to make it fully operable, there are a few more steps to take.
While many beginner entrepreneurs choose to use their personal bank accounts for LLC purposes, we strongly recommend that you refrain from following this strategy and rather open a dedicated bank account for your LLC right after registration.
First and foremost, this move will split your personal and business funds from the very beginning, which is a must for making use of the asset protective screen to the full and avoid any confusion or related legal problems that might be caused by mixed assets.
To continue, separate accounts make bookkeeping much easier by accurately tracing business revenues, expenses, and cash flows.
Finally, a dedicated bank account will further contribute to your LLC reputation and business image and bring more fundraising opportunities. Entities with independent checking accounts look more reliable and trustworthy in the eyes of banks, credit agencies, and investors.
While an LLC provides secure personal protection to its owners, it needs protection as a legal entity as well since business is not only about revenues but also about problems and challenges. You never know what could happen in the course of entrepreneurial activity but with the right business insurance at hand, you’ll be able to minimize your potential company risks.
In Colorado, all LLCs are required to have Worker’s Compensation Insurance for all company employees, Automobile Insurance to secure company vehicles against damages, and Professional Insurance for doctors and healthcare specialists.
Other common types of insurance you are recommended to get for your Colorado LLC include general liability insurance against personal injuries and property damages, business liability insurance against natural disasters, thefts, and other force majeur situations, and business income insurance to protect your LLC profits against damage claims.
Apart from the above steps you need to take to efficiently run your enterprise, there are certain post-formation legal requirements you’ll have to observe to keep your company in good standing with the state:
A limited liability company is a welcoming legal structure for many businesses. Start an LLC is easy. Select your state to start.