Last Updated on June 13, 2022 by Fair Punishment Team
Are you thinking of starting a business in Colorado?
A Limited Liability Company (often simply referred to as an LLC) is a type of business model within the USA that essentially offers its owner the ability to evade personal liability and debts while also offering unique tax advantages that other business structures do not.
Essentially, a limited liability company works by incorporating the limited liability that comes with an elected corporation, with the freedom that comes along with owning a sole proprietorship, allowing the owner of said business to not be liable for lawsuits or debts. This makes it a great option for startups and small businesses.
The only question is, how do you go about starting up your very own LLC, exactly?
This is where we come in! To help streamline the often confusing process, we are going to be sharing with you six basic steps that you can begin implementing today to get your business successfully registered and up and running.
From the important business documentation you’re going to need to make sure that you acquire, to naming your LLC correctly, all the way to the potential tax requirements you might face, we’re going to be covering all bases so that you are going to be able to establish your LLC without any missteps. Just read on!
Name Your Colorado LLC!
Kicking this list off, the first thing you are going to want to do is to give your LLC a name. In order to be able to register your LLC, take out business loans and file for important documentation, you’re going to need to pick a name for your Limited Liability Company!
Firstly, when you choose a name for your LLC, you’re going to want to make sure that you are selecting a name that is going to provide a clear insight into what it is that your company is going to be offering.
In addition to this, you are also going to need to make sure that you are picking a name that is catchy and going to stand out from the rest.
If you need some inspiration, why don’t you consider checking out some of the names that your competitors are using and then having a brainstorming session from there?
Along with picking a name that is clear and catchy, you are also going to want to make sure that you are meeting the requirements set by the state of Colorado.
In order to be able to operate within the state, you are going to need to make sure that the name that you select for your LLC meets the following criteria:
Does Not Contain Any Restricted Words
First things first, when naming your LLC, you are going to need to make sure that the name that you choose does not contain any restricted words such as bank, attorney, law, etc.
So, before naming your LLC, make sure that you aren’t using any words that have been restricted by the state.
Contains Either LLC, Limited Liability Company Or L.L.C
The next requirement that you will need to make sure that you meet is ensuring to include either LLC, L.L.C or Limited Liability Company.
It is very important to make sure that you include your chosen term somewhere in the name, otherwise you will be unable to register your company name.
Make Sure That The Name Does Not Copy Another Registered Name
Last but certainly not least, the final consideration that you are going to need to make when choosing a name for your LLC is to ensure that the name you choose does not copy the name of another existing company in Colorado.
To do this, you will need to search up the name that you would like to use via the Secretary of State Business Website Search.
In addition to all of the above, you might also want to consider if the name that you would like to use for your LLC is available as a domain name, too.
Even if you aren’t planning on having an online website, chances are that at some point you are going to want to take your business online, so it’s a good idea to make sure that the name of your LLC is also available as a domain URL, too.
Choose A Registered Agent
After you have chosen the name that you would like for your Limited Liability Company, the next step is to appoint something that is known as a registered agent.
Put simply, a registered agent is a person or company that has been chosen to receive the responsibility of receiving official documents on behalf of a Limited Liability Company.
Anyone can be appointed as your LLCs registered agent, however, keep in mind that there are a few requirements that you will need to meet to be able to operate your business within Colorado. They consist of the following:
- The registered agent that you choose for your LLC must be registered to work in Colorado, as well as have an address situated within the state, too.
- The chosen registered agent must be able to receive legal and business correspondence on behalf of your LLC during standard business hours, either on-site or in their registered office.
- The registered agent must be registered to legally work as a registered agent.
As well as all of the above, the registered agent that you choose to represent your LLC as well as receive all external communications will also be responsible for altering you to any legal notices that you may receive over the duration of your LLC, too.
File The Articles Of Incorporation
The next important step that you will need to take to set up your LLC is to create the Articles of Incorporation.
The Articles of Incorporation will not only help to establish your LLC, but it will also serve as a way to clearly outline the way that your company is going to be managed, as well as other important information.
In order to create your Articles of Incorporation, you are going to need to prepare them yourself and then send them to the Secretary of State’s Office as well as through the Territorial Legislature in order to get them approved.
- The name of your LLC and the address that it has been addressed to.
- The name and contact information of the person or organization that you have appointed as your registered agent.
- The time period of your LLC. Typically, this will be listed as perpetual, as the majority of LLCs have no certain end. However, if your LLC is only going to be serving a specific purpose, then you will need to list the end date of your LLC within the Articles of Incorporation.
- The management structure of your LLC.
- The names and contact information of all LLC members.
- A statement that clearly outlines whether or not the members of the LLC are going to be liable for the company’s debts or not.
- The signature of the person creating the Limited Liability Company.
As a side note, it currently costs $50 to file Articles of Incorporation within Colorado online and comes to a total of $185 including state fees. In addition to this, if you are required to make any amends to your articles, it will cost you an additional $25 each time.
You can find the template here.
Create An Operating Agreement
After you have finished finalizing your Articles of Incorporation and you have sent them off to be approved by the Colorado secretary of state, the next important business document that you are going to need to create is an operating agreement.
Technically speaking, an operating agreement isn’t actually a legal requirement within Colorado, however, it is strongly recommended that you make sure to create one regardless of this.
Wondering why? Well, an operating agreement essentially serves as an internal document that will allow you to lay out the groundwork for how your business is run, as well as contain important information that will help to settle any legal disputes or misunderstandings you might find yourself having to deal with.
If you do not create an operating agreement, the responsibilities for settling any potential disputes or misunderstandings will fall to the state of Colorado and its courts, which means that the decisions that are reached will not only be out of your control, but may not actually be in the best interest of your business, either.
For this reason, it is important to make sure that you take the time to create an operating agreement, even though it isn’t necessarily required.
Here is a quick rundown of what your operating agreement will need to contain:
- You may need to include information about your Articles of Incorporation.
- The name and contact information of the person or company that you have chosen to be your registered agent.
- What your LLC is, as well as what it offers.
- The duration of your LLC.
- What the procedure for hiring new employees is, as well as what your LLCs exit process is.
- What the management structure of your LLC is.
- The various members of your LLC and what their specific role is within the company.
- Liability clauses.
If you would like to create your operating agreement for the state of Colorado, please click here for a template that you can use.
Get An EIN Number
After you have filed all of the necessary business documents that you will need to legally operate your LLC within the state of Colorado, you are then going to need to make sure that you have assigned your LLC to an EIN.
If you aren’t already aware of what an EIN is, it stands for Employer identification number and is what the Internal Revenues System will use to be able to assign your LLC to the relevant tax returns.
It is very important that you make sure to file for one of these for your LLC, as EINs are required for all business entities, including LLCs and sole proprietors.
Decide If You Need A BIN
The final step to setting up your Limited Liability Company is to determine whether or not you are going to need to get a BIN, which stands for Business Identification Number.
Unlike the Employer Identification Number which is a requirement in Colorado for general tax purposes, you don’t always need to have a BIN assigned to an LLC.
The only reason that would require you to register a Business Identification Number to your LLC is if you happen to have employees hired at your LLC, as the BIN handles payroll taxes specifically.
With that being said, if you are going to be starting up your LLC with a small team of employees already in place, you are going to need to make sure that you are assigning your LLC with an Employer Register Number as well as a Business Identification Number.
Keep in mind that, if you neglect to properly file your taxes, then there is a strong chance that the IRS will end up imposing sanctions on your company, including having to pay your tax liability in full, as well as potentially even recieving a fine.
Frequently Asked Questions
Do I Need A Business License?
If you have already begun to do some of your own research regarding LLCs, you might have noticed that business licenses are not always required for LLC owners.
However, it is important to note that, at the time of writing this article, it is currently mandatory for all business owners within Colorado to own the appropriate business licenses that are relevant to the work that they are doing, as well as the industry that they are operating within.
So, if you are planning to open up a Limited Liability Company within COlorado, you are going to need to apply for a business license in order to legally operate your business within the state, as Colorda does not currently view an LLC alone as an adequate business license.
What Are The Tax Requirements For LLCs In Colorado?
When it comes to setting up a Limited Liability Company within the state of Colorado, one of the biggest questions that many new LLC owners find themselves asking is what the tax requirements for their business are going to be.
At the time of writing this, Colorado currently views LLCs as pass-through entities, which means that all owners of LLCs within the state will be required to pay the standard Colorado income tax rate of 4.63% across all of their profits.
To follow on, even though you will be taxed the flat income tax rate if you do choose to proceed to start an LLC in Colorado, it is worth noting that your LLC won’t be taxed as a corporation, which means that you will be able to avoid double taxation simply due to the fact that you and your LLC will be taxed as one legal entity.
However, keep in mind that if you are located in a different state but want to open up an LLC in Colorado, you might be required to pay income tax if the state that you live in requires you to do so.