The state of Colorado offers a beautiful backdrop to start and grow your business. Protect your assets by forming an LLC. An LLC provides minimal compliance requirements, many tax advantages and few ownership restrictions, providing you with a flexible way to get your venture off the ground. Follow these 3 steps to form your LLC in Colorado.
The first step in forming an LLC in Colorado is to choose a name. The name you select for your new LLC must not be the same as any other Colorado business entity registered or reserved with the Colorado Secretary of State. This applies to entities formed in Colorado, as well as those originally formed elsewhere but authorized to conduct business in the Centennial State.
The LLC name must contain, as the last words of the name, one of the following terms: “Limited Liability Company;” “LLC” or “L.L.C.;” “Limited Company;” “LC” or “L.C.” The word “Limited” may be abbreviated as “Ltd.” and the word “Company” can be abbreviated as “Co.”
After you have chosen a name, the next step to getting your Colorado LLC up and running requires filing articles of organization with the Corporate Division of the Colorado Secretary of State. The fee for filing your articles of organization is $50. The articles of organization must include:
It may also include other provisions that the members choose to set forth (as long as they are consistent 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.
Similar to a corporation’s bylaws, creating an operating agreement isn’t mandated by the state, but it is a critical internal document that officially documents how the LLC will run. It should list:
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.
An LLC in Colorado 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 Colorado 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.
If you are interested in forming a new LLC in Colorado, there are a few tasks you will need to take care of each year. Colorado LLCs must file an annual report 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.
If your Colorado LLC if set up through Incfile, we will send you courtesy reminder emails when ongoing requirements are approaching.
What about 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 considered a “pass-through entity” allowing LLC owners to report business losses or profits on their personal tax returns each year, in the same manner as a partnership.
The tax rate for Colorado LLCs varies, based on Colorado taxable net income.
Do you have a Colorado LLC that you need to close or dissolve? An LLC is dissolved when any one of the following events occurs:
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