Articles of Organization

Getting your LLC up and running in Colorado requires filing of articles of organization with the Corporate Division of the Colorado Secretary of State (along with the inevitable fee, which is Colorado's case is $50. The articles of organization must include:

• The LLC's name
• The LLC's principal place of business
• The name and business address of the LLC's registered agent
• Whether the LLC will be manager- or member-managed
• The names and addresses of the managers or initial members.

It may also include other provisions that the members choose to set forth (as long as they are not inconsistent with state law), even ones that are also included in the operating agreement.

Your LLC is considered "organized" once an original and a copy of the articles of organization are received and approved by the state. One certified copy of the articles of organization will be kept by the state, and the other certified copy will be returned to the organizer or members.

The organizer may be an individual of legal age, corporation, governmental subdivision or agency, business trust, estate, trust, LLC, partnership, association, or other legal entity, and is not required to be a member of the LLC. There must be at least one organizer.

Registered Agent and Office

Every Colorado LLC must have a registered agent in the state who is designated to receive official state administrative and legal correspondence. A registered agent for an LLC can be an individual Colorado resident at least 18 years old, or a business entity having a usual place of business at a Colorado address. Only one person or business entity may be appointed as the LLC's agent.

Operating Agreement

After its articles of organization, an LLC's most important document is its operating agreement, which can be amended or repealed as allowed by the agreement or applicable state law. Just like a corporation's bylaws, this isn't mandated by the state-but it's a critical internal document that officially documents how the LLC will run. It should list the members, how much each member has invested, how profits will be divided, and how much weight each member has when matters come to a vote.

It may also specify meeting requirements (notice, quorum, voting rules, etc.) and so on, but it is not required to. Normally, however, the operating agreement does include state-mandated requirements. It can contain restrictions or prohibitions on the power of the members to adopt, amend, or repeal an operating agreement. If there is more than one member, the operating agreement has to initially be approved by all the members in writing.

Membership in the LLC

An LLC must have at least one member. Each member must be a natural person or a recognized business entity. A member may acquire an interest in the LLC when it is formed, or in a way set forth in the operating agreement or when the person's admission is documented in the LLC's records. To become a member, an individual normally needs to make a contribution, pay cash, or transfer property to the LLC, or assume an obligation to do so. However, a person may be admitted as an LLC member without acquiring a membership interest if there is such a provision in the articles of organization or operating agreement, or if all members agree and the new member's admission is documented in the company records.

A member can only resign from the LLC as set forth in the articles of organization or operating agreement. These documents also usually specify a minimum period of time a member can be a member before being allowed to resign. LLCs have the option of pursuing remedies for damages suffered by the LLC resulting from a member's resignation that violates the terms in the operating agreement.

Ongoing Requirements

LLCs must file a report annually to the Colorado Secretary of State that lists the registered agent's name and address, as well as the address of the LLC's principal office.

Each LLC must keep the following records open to inspection at its office:

• A current list of the full name and address of all current and former members and managers
• A copy of the articles of organization with any amendments and powers of attorney
• Copies of the LLC's federal, state, and local income tax returns and reports for the three most recent years
• The current written operating agreement and copies of any financial statements for the three most recent years
• Minutes of every annual and special meeting and any meeting

Additionally, LLCs in Colorado must maintain the following types of records open to inspection at their office:

• Names and addresses of all members and managers
• Copies of records that would enable a member to determine the relative voting rights of the members
• A copy of the articles of organization, together with any amendments thereto
• Copies of the LLC's federal, state, and local income tax returns for the last three years
• A copy of the written operating agreement with any amendments
• Copies of the LLC's financial statements for the three most recent years

In addition, it's a good idea for your LLC to keep minutes of the proceedings and committees of the owners or members.

Dissolution

An LLC is dissolved when any one of the following events occurs:

• Event(s) specified as requiring dissolution in the articles of organization or operating agreement
• Unanimous agreement by all the members to dissolve the LLC
• Event that makes it illegal for the LLC to continue
• Court order ordering dissolution

Taxes

An LLC offers some tax advantages over a corporation, including the availability of more deductions. Additionally, an LLC is not required to be a separate tax entity like a corporation. Instead, it can be a "pass-through entity" when it comes to taxes, so that the LLC owners report business losses or profits on their personal tax returns, in the same manner as a partnership.

The tax rate for Colorado LLCs varies, based on Colorado taxable net income.

Articles of Incorporation

Colorado requires that a new corporation's articles of incorporation must be filed (along with a $50 fee) with the Colorado Secretary of State, and that certain information be included:

• There must be at least one incorporator, who can be either a natural person of at least 18 years of age or a corporation; the incorporator signs and files the articles of incorporation with the Secretary of State. The incorporator is not required to be a director, shareholder, or officer.
• Name and address of the initial registered agent (who must sign the articles, acknowledging acceptance of the appointment.
• The number and classes of shares that the corporation is authorized to issue.
• If cumulative voting is not desired during the election of directors, this must be specified in the articles.

Other items that are not required, but are allowed to be included in the articles of incorporation, are:

• Names and addresses of directors and director eligibility requirements.
• Corporate purpose.
• Circumstances where shareholders can be liable for corporate debts.
• Par value for authorized shares or classes of stock.
• Provisions for managing the business and regulating the affairs of the corporation.

Registered Agent and Office

Every Colorado corporation must have a registered agent in the state-a natural person with a primary residence in Colorado, or a registered business entity authorized to conduct business in the state.

Bylaws

A corporation must maintain its bylaws at its main executive office, but is not required to file them with the state. The incorporators or board of directors should adopt the corporation's bylaws at its initial meeting-insuring that they do not conflict with the articles of incorporation-and keep them updated as time goes on. Bylaws describe the corporation's basic operating principles from both the managerial and legal perspectives, and should include as a minimum:

• How, when, and where shareholders and directors meetings are held
• What authority directors have, how many there are, and how long they serve
• How consensus on major decisions is reached with and without meetings
• Duties and responsibilities of officers and how long they serve
• How stock is issued
• Requirements for providing annual financial information to shareholders

Directors and Officers

The board of directors is responsible for making major decisions for the corporation. Officers of the company must be listed in the bylaws or elected by the board. At least one officer must authenticate records for the corporation, as well as prepare minutes of directors' and shareholders meetings. Any officer may hold more than one office in the corporation unless otherwise prohibited by law.

Required Reports

A Colorado corporation must file an annual report with the Colorado Secretary of State each year that includes the corporation's name, principal office, names and addresses of directors and officers, and any information that has changed since the filing of the articles of incorporation. Colorado strongly encourages electronic filing of annual reports.

Taxes

Colorado has both a corporate income tax and a sales tax for businesses; actual rates depend on the type and amount of business activity.

A "subchapter S" corporation or "S-Corporation" is one that chooses to be treated as a pass-through entity (the same way as a sole proprietorship or partnership) for tax purposes, meaning that the tax-related information for the "S-Corp" is filed as part of the owner's individual income tax. Since Colorado has a state income tax, a subchapter-S choice when forming a corporation affects state and federal taxes for Centennial State corporations.