How to Start an LLC in Colorado?
This guide offers important information for potential business owners who need 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.
Here is what you’ll learn:
Section I – Registration Process for LLC Colorado
a) Name Availability
b) Submission of Article of Organization
c) Securing your business account
Section II – Post-Registration Process
1. How to Create an Operational Agreement
2. How to get an EIN, Employer identification number
3. How to Open a Business Account
4. How to check if you require a License or a Business Permit
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 – REGISTRATION PROCESS
Opening a Colorado LLC is a relatively easy process. Potential business owners just need to fill an online form to register with the state department. In order to register, you will need to visit the Colorado Secretary of State website.
This guide offers simple-to-follow instructions on how you can register your company in Colorado, and what are the important steps you need to take after the registration process is completed.
To register a company, you will need to:
• Check if your desired business name is available
• Submit “Article of Organization” to Colorado Secretary of State
• Secure your business account
Every business registered with the state of Colorado must have a unique name. A unique name means that no one else in the state is using the name; however, 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 for registration, you should visit the Colorado LLC Search State Business Database.
Apart from selecting a unique name, 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 isn’t 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 open your business.
Once everything seems according to the plan, it’s time to register the name. The only provision for registering the name in Colorado is a requirement to include LLC or any of the related terms in your business name. If you’re still confused about the name, you may also reserve a name for up to 120 days, online.
Submit Article of Organization to Colorado Secretary of State LLC
The article of organization is a simple online form consisting of eight minor sections. You must complete each section to officially register your company with the state. While each section is simple to follow, you will need to understand how and where to get information to fill in each section?
The following guide will help you fill the form accurately:
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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 form. On the other hand, if you are a resident of Colorado, you may also designate your home address as the office address.
Most businessmen do not name their home address as an office 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 at their office address.
One of the easiest methods to solve this issue is to use a virtual office address or the address provided by a registered agent. There are many reputable professional companies offering office address and registered agent services. For a low cost, you can have a high-street reputable address that can serve as your official office address in Colorado.
Such methods are also extremely popular with online businesses, franchise, and foreign entities, which can get an office address at a reasonable cost.
Since professional companies are registered with the Department of State, everything is done in under the most professional and legal framework. In addition, new businesses don’t need to reveal their private home address to spammers and advertising companies.
Address of a Registered Agent
A registered agent is someone with a physical address in Colorado who can be contacted by the state to deliver legal letters and official documents. An LLC registered in Colorado must have a registered agent who can receive legal documents from the state.
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 online businesses, multi-member company, and foreign entity, it is better to appoint a professional registered agent as the agent will receive and forward all the important documents to the company. Even if you are a single-member LLC or multi-member LLC with a physical address in Colorado, appointing an agent can benefit in a lot of ways.
For instance, a registered agent is qualified to receive legal documents for a variety of its clients, which means that they are trained to deliver legal documents responsibly to everyone. Irrespective of the day of the year, these registered agents make sure that the important documents are delivered to the right recipient at the right time.
If you are your own registered agent or someone in your office is named as the registered agent, they must be available to receive legal documents. 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. Nowadays, a lot of professional companies offer online access to their clients so they can view their scanned documents from the convenience of their homes.
The Legal Name of the Filer
In this section, you will need to name the person who is filing the article of organization. If it’s a single-member company, you will put your details and address in the form. If you have a multi-member company, you must list the names and address of all the members of the company irrespective of the fact if they are filing or not.
While the heading may be misleading but this section informs the state authorities regarding the owners, members, and managers of a company. 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 consult a professional agent or a lawyer who can assist you with such filings.
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 company is considered to be run by a member. Similarly, if there is more than one stakeholder in a company, then the LLC is said to be run by its members. In both of these cases, your company 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 company. 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 a company who will take charge of all the operations. While it may seem strange to confirm such a question but there are a lot of new businesses that are not aware of the legal structure and operating procedures. After registering the company, these businessmen usually don’t pay attention to legalities and professional commitments.
The Effective Date of Business
This is the date when you want your business to officially open. By default, most businesses put a date that they think they will get their business registered. At this time, you don’t need to worry about guessing the correct 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 also select a date in the future.
This is an optional field, which you may skip; however, 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 on this email address.
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.
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 at your registered agent address but you can also get updates and information on such an email.
Name & Address of the Filer
You are required to fill in the name and address of the person filing the article of organization. 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 article of organization is ready for the submission. The last part is to pay the filing fees. You can pay the $50 fee using any major credit card or you may also use a pre-paid account. Before submitting the official document, make sure to make a copy for your records.
As discussed earlier, there are three parts to the registration process. Initially, you would select a name; secondly, you would submit the article of organization; and lastly, you are required to secure your business account.
Secure Your Business Account
It is optional to secure your business account. Still, the state of Colorado encourages all business 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 article of organization.
Only the filer of the document can set up a password. 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. It means that only authorized changes are permitted on the account. This is handy if someone has submitted an operational agreement along with the submission. We will discuss the importance of an operational agreement in the following paragraphs.
SECTION II: POST REGISTRATION
Once your business is registered, you also need to ensure that you complete certain important things to run your business in an efficient manner. Let’s discuss these important business steps that you must take after registering a business.
Create an LLC Operating Agreement Colorado
An operational agreement identifies the operational structure of the company and how it is run. A multi-member company requires operational agreement because members should know their roles and responsibilities. If members are liable for what they do, it will ensure that disputes are resolved quickly in an efficient manner.
A sample operational agreement will include the management structure of the LLC; share of each member in the company; profit-loss distribution methods; method to change members; dissolution process; and steps for changing an operating agreement.
You can find plenty of samples online; however, it’s best to talk to an attorney or 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 individual members.
Apply for EIN
EIN stands for an employer identification number. Every multi-member company needs an EIN because it helps them pay taxes and deal with a lot of other business issues. Even for a sole owner of a company, EIN is necessary if the owner wants to open a business account, get a loan, or pay certain sales tax. Overall, everyone needs an employer identification number.
To get EIN, you just need to go to the IRS website and fill 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.
Open a Business Bank Account
To carry out business transactions, it is always better to open a commercial bank account. You can open a business bank account by calling your bank. Each bank has certain simple requirements before they can allow anyone to open a commercial account.
Basically, you will need a copy of an article of organization, EIN, and an operating agreement to open such accounts.
Often, single owners of a business do not open a commercial bank account because they prefer to do business on their personal accounts. While this is theoretically possible, you will likely get to a point where someone else will require you to give them a business account before proceeding with the transactions.
Nowadays, a commercial account is needed if you want to present yourself as a professional business entity.
Get a Business License
Certain types of businesses require special permits and license before starting their businesses. Examples of these businesses include psychologists, therapists, plumbers, architects, barbers, nail technicians, and engineers. You cannot run a business without getting the proper permit from state authorities.
The state of Colorado has made it easier for everyone to check if they require a special permit or a license. Here is a link to check if you need the license to operate your business. You should also check with the city government if they also require you to have a license.
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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.
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.
Get a Sales Tax License
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. Based on the sales tax, you can charge the 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 about sales tax, 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. Unlike financial reports, these reports are needed to update the state regarding any changes to your business operations. 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.
Hopefully, this article has offered you an overview of how you can register and operate your business in the initial days. If you feel overwhelmed by the information, please note that it usually takes some time for new business owners to get used to the requirements.
Once settled, it will be easier to fulfill potential business needs. It is also highly recommended that you consult a reputable professional agent to help you with your business tasks. While a professional agent may charge you a couple of hundred dollars to take care of the entire process, it is usually a great value for your money. By outsourcing important business tasks, you can concentrate on business issues instead of spending a huge capital to pay the lawyer fees.
To keep it simple, start by completing one task at a time. At this point, you should only focus on registering your business. 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 licenses, if required. If you follow this guide one step at a time, you will definitely reach your goals earlier than your expectations.