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Starting A Colorado LLC: How to Form An LLC in Colorado
If you’re looking to start a Colorado business, it’s a great idea to form a limited liability company (LLC). Colorado offers business entities many benefits when they register as an LLC. One of the most important benefits is asset protection, however, there are many additional benefits that come with opening an LLC in Colorado.
When you form an LLC in Colorado, your personal assets are kept separately from your Colorado business. This means that your personal bank account, property, and possessions are kept safe in the case of lawsuits or debts regarding your Colorado LLC. This guide offers important information for potential business owners who want to register an LLC in Colorado. For ease of understanding, the article is divided into two sections.
The first section talks about the business registration process, while the section describes important steps that you must take after registering your company. These steps include critical requirements such as getting an EIN and opening a bank account, etc. The post-registration process, explained in the second section, is as important as registering the company because it will allow you to streamline your business process.
Section I – Registration Process for your Colorado LLC
a) Name availability
b) Submission of Articles of Organization
c) Securing your business account
Section II – Post-Registration Process
1. How to create an LLC Operating Agreement
2. How to obtain an EIN
3. How to open a business bank account
4. How to check if you require business licenses
5. How to open a wage withholding account
6. How to get a sales tax license
7. How to fill periodic reports, if required
Section I – The Registration Process
Starting a business in Colorado is a fairly easy process. Potential business owners just need to fill out an online form to register with the state department so they can form an LLC. In order to register, you will need to visit the Colorado Secretary of State website.
To register a company, you will need to:
• Check if your desired business name is available
• Submit the Articles of Organization to the Colorado Secretary of State
• Secure your business account for your Colorado LLC
Choose A Name for Your Colorado Limited Liability Company (LLC)
Every business registered with the state of Colorado must have a unique business entity name. A unique name means that no one else in the state is using the same business name, although it should be noted that someone can have a similar name in another U.S. state. The only way to check if your name is available is to visit the Colorado LLC Business Entity Name Search Database.
Apart from selecting a unique name for your Colorado LLC, you should also consider checking the United States Patent & Trademark Office for a trademark infringement or copyright issues. Usually, you would want to see if there is a similar name or trademark that matches your business name. If there is such a name or trademark, you should avoid naming your business similar to that particular trademark because you are likely to run in legal issues as soon as you form the LLC in Colorado.
Once you have chosen your LLC name, it’s time to register the Colorado LLC under the LLC name with the Colorado secretary of state. The only provision for registering the LLC name in Colorado is a requirement to include LLC or any of the related terms in your business name. If you’re unsure about what to name your Colorado LLC, you may also reserve a name for up to 120 days through the Colorado Secretary of State website.
Submit the LLC Articles of Organization to the Colorado Secretary of State
The LLC Articles of Organization is an important document that is required to form an LLC. You must complete each section to officially register your limited liability company with the state. While each section is simple to fill out, there is a lot of information required when you start a new LLC in Colorado.
If you need help navigating any part of the process, contact the professionals at LLC Formations so we can help you file the Articles of Organization for your Colorado LLC with the Colorado secretary of state.
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Principal Mailing and Street Address
In this field, you must disclose the physical address of your office in the state of Colorado. For businesses that have a brick-and-mortar store or a physical storefront in Colorado, it’s easy to fill this part of the form. On the other hand, if you are a resident of Colorado, you may also designate your home address as the Principal office address for your Colorado LLC.
Most businessmen do not name their home address as a business address because these business filings are in the public domain, which means that your address will be accessible to marketers. In fact, no one wants to get tons of spam emails every day.
One of the easiest methods to solve this issue is to use a virtual address or the address provided by a registered agent. There are many reputable professional companies offering business addresses and registered agent services. For a low cost, you can have a high-street reputable address that can serve as your official address in Colorado, which can be even more beneficial if you live outside of Colorado.
Address of a Registered Agent
When you form an LLC, you need to designate a registered agent for your Colorado LLC. A registered agent is someone with a physical address in Colorado who can be contacted by the state to receive legal letters and official documents for your Colorado LLC. Your registered agent must be listed on the Articles of Organization for your LLC in Colorado.
According to the law of Colorado, a single-member company can be its own registered agent because there is only one member who can take care of legal communications for the limited liability company. For online businesses, multi-member LLCs, and foreign entity LLCs, it is better to appoint a professional registered agent as the agent will receive and forward all of the important documents for Colorado LLCs.
A registered agent is qualified to receive legal documents for a variety of clients, which means that they are trained to deliver legal documents responsibly. Irrespective of the day of the year, registered agents make sure that they are available for the LLC formation process and beyond.
If you are your own registered agent or if someone in your office is named as the registered agent, they must be available to receive legal documents at a Colorado mailing address. It means a lot of responsibility on their shoulders as registered agents are held liable for their duties. In such a case, it pays to spend a few dollars to ask a professional company to take care of the registered agent process when starting a business.
The Legal Name of the Filer
In this section, you will need to name the person who is filing the Articles of Organization with the secretary of state. If it’s a single-member LLC, you will put your details and address in the form. If you have a multi-member LLC, you must list the names and address of all the members of the company irrespective of if they are filing or not.
This section informs the state authorities regarding the owners, members, and managers of the Colorado LLC. You can attach a blank paper or a PDF to include multiple names if required. If you’re not sure how to fill the information, please contact the professionals at LLC Formations so we can help you get started with your LLC in Colorado.
The Management Structure
Most limited liability companies are either controlled by the members or by a manager appointed by the owner. If you are the only person who will be running a business, then the Colorado LLC is considered to be run by a member. Similarly, if there is more than one stakeholder in the LLC, then the LLC is said to be run by its members. In both of these cases, your LLC is a member-managed company.
On the other hand, if someone appoints a manager to run the company, then the company is said to be run by a manager. There are several instances in which multiple members of the company may appoint a manager to run the show. Such business structures are common when members believe that a certain manager or managers have the unique skills required to run the business entity.
A simple example would be a general manager of a hotel. Usually, the hospitality industry has a general manager who takes care of all the hotel affairs. In this section, you just need to let authorities know the type of management structure. Accordingly, the management structure will be either member-managed or member-managed.
Confirmation of a Member
The state needs confirmation that there is at least one member in the LLC who will take charge of all the LLCs operations. While it may seem strange to confirm such a statement, there are a lot of new businesses that are not aware of the legal structure and operating procedures in Colorado state. Your registered agent is in a partnership with your LLC, so this is an important part of registering your limited liability company.
The Effective Date of Business
This is the date when you want your business in Colorado to officially open. By default, most businesses put a date that they think they will get their LLC registered by. At this time, you don’t need to worry about guessing the correct LLC effective date as anything that is logical is acceptable. The effective date can be any day 90 days in the future.
Sometimes, businessmen chose a future date to avoid the end of a tax year. Similarly, some businesses want to start with a “soft opening” for advertising purposes. The franchise, branches, and contract-based business may need to select a date in the future also.
This is an optional field, but we recommend that you should put a generic email address to receive important notification from the state department. Besides sending a letter to the registered agent, they may send you updates and necessary documents for your business in Colorado.
If you decide to provide authorities with an email address, make sure it is not an email that you use frequently. Avoid giving your official email address or personal email address because such an email is in the public domain, which is often used by marketers. As a result, you don’t want your important inbox to be filled with spam and advertising emails once you form your LLC.
Instead of using a popular email address, create a new email address that you can check occasionally to review any important updates from the state office. Usually, your important documents will always be mailed to the registered agent listed on your Articles of Organization.
Name & Street Address of the Filer
You are required to file in the name and address of the person filing the Articles of Organization for the Colorado limited liability company. Think of this section as a kind of official signature. If there is more than one person filing the form, then they should also include their name and the address.
Once done, the Articles of Organization is ready for submission. The last part is to pay the filing fee. You can pay the $50 filing fee using any major credit card. You may also use a pre-paid account to pay the filing fee. Before submitting the official document, make sure to make a copy of the filing for your records.
The state filing fees are only paid when you open your LLC. You may need to pay renewal fees or fees for business licenses in the future. As discussed earlier, there are three parts to the registration process. Step 1 is to select a name, then you submit the Articles of Organization, and lastly, you are required to secure your business account.
Secure Your Business Account
The state of Colorado encourages all LLC owners to secure their business accounts so no one can make undue changes to the document. You can easily secure the business account by following the link provided at the end of submitting the Articles of Organization.
Only the filer of the document can set up a password during the LLC formation process. Securing your business account will ensure that you and other stakeholders know that any changes will only be done by the filer. If someone else changes the account, the online system will have an official record of such changes.
SECTION II: POST REGISTRATION
Once your LLC is registered, you also need to ensure that you complete certain steps to run your business in an efficient manner. Here are some of the important steps to take after forming an LLC:
Create an LLC Operating Agreement
An Operating Agreement identifies the operational structure of the LLC and how it runs. A multi-member LLC requires an Operating Agreement because members should know their roles and responsibilities within the LLC. If members have to be liable for what they do, it will ensure that disputes are resolved quickly in an efficient manner so your business entity can stay in good standing.
A sample Operating Agreement includes:
- The management structure of the LLC
- Share of each member in the company
- Profit-loss distribution methods
- Method to change members
- Dissolution process
- Steps for changing an Operating Agreement.
When forming an LLC, it’s best to talk to a professional company to help you draft an Operating Agreement. Getting help from a professional means that your agreement will be drafted according to the state laws and the requirement of your specific LLC. Contact the team at LLC Formations so we can help you start an LLC.
Apply for An EIN
EIN stands for employer identification number. Every multi-member company needs an EIN because it helps them pay taxes and deal with a lot of other parts of doing business. Even for a sole owner of a company, EIN is necessary if the owner wants to open a business account, get a loan, hire employees, or pay certain taxes.
To get an EIN, you just need to go to the Internal Revenue Service (IRS) website and file a very simple SS-4 form. After filling basic information, you will get a 9-digit EIN that you can use to fulfill various business requirements. This whole process can be done online easily.
If you need help applying for an EIN, contact LLC Formations so we can help you start an LLC in Colorado state.
Open a Business Bank Account
To carry out business transactions, it is always better for LLCs to open a business entity bank account. You can open a business bank account by calling your bank. Each bank has certain requirements before they can allow anyone to open a commercial account.
You will need a copy of your Articles of Organization, your EIN, and an Operating Agreement to open such accounts. This will need to be done in person and it cannot be done online. Nowadays, a commercial account is needed if LLCs want to be seen as a professional business entity. If you’re looking to do partnerships with other LLCs, you may only be able to do so if you use a business bank account for your LLC.
Get a Business License
Certain types of businesses require special business licenses before you can operate as an LLC. Examples of these businesses include psychologists, therapists, plumbers, architects, barbers, nail technicians, and engineers. You cannot run an LLC without filing for the proper permit from state authorities.
The state of Colorado has made it easier for LLCs to check if they require a special permit or a license when forming the LLC. Here is a link to check if you need a license to operate your Colorado state LLC. You should also check with the city government if they will also require you to have a license when you’re forming the LLC.
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Open a Wage Withholding Account
If you want to withhold taxes from your employee paychecks, then you should apply to open a wage withholding account with the state department. The wage of an employee or contractor on W-2 or 1099 can be withheld for tax purposes within the LLC.
Opening a wage withholding account is free and very easy. After opening the account, you can directly pay any taxes using the online portal. Perhaps, this is the very first thing that you should do if you have an employee or you wish to hire someone on a contract for your Colorado LLC.
Get a Sales Tax License for Your LLC
If you open a withholding tax account, you will automatically get a sales tax license. The sales tax license is required by everyone who sells something to the customer. This allows you to charge sales tax to the customer.
The amount of sales tax that you collect must be submitted to the Colorado Department of Revenue. For more information, you should also consult an attorney or a professional agent looking after your business.
Remain in Good Standing
After taking care of all the basic requirements, you should update your information with the state by filing annual reports for your LLC. Unlike financial reports, these reports are needed to update the state regarding any changes to your LLC. You may access such reports online as each business owner can review periodic reports online.
A professional agent or a business lawyer can also help you remain updated regarding new requirements and changes. Overall, you need to ensure that your entire business process is streamlined according to the legal and operational requirements of running an LLC.
How Can LLC Formations Help You?
Hopefully this article has offered you an overview about how you can register and operate your LLC in its early days. The process is simple, but there are many steps involved that may make it seem complicated. With the help of the professionals at LLC Formations, you can get your LLC up and running in no time.
To keep it simple, start by completing one task at a time. At this point, you should only focus on registering your LLC. Once you get the registration papers and the number from the state authorities, it’s time to think about other matters, such as getting an employer identification number, opening a bank account, and getting business licenses for your LLC, if required. If you follow this guide one step at a time, you will quickly be able to open your own LLC successfully.