Colorado LLC
Forming a limited liability company (LLC) in Colorado is not that different from forming an LLC in any other state.
Choosing a Name for Your LLC
The name you choose for your LLC must not be the same as any other Colorado LLC, corporation, or other business entity (for-profit or nonprofit) on file 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.”
Articles of Organization
Similar to most other states, formation of an LLC in Colorado requires filing of articles of organization with the Corporate Division of the Colorado Secretary of State; there is a $50 filing fee.
The articles of organization must include the company name, its principal place of business, the name and business address of the registered agent for the LLC, whether the LLC will be manager- or member-managed, and 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) that may also be included in the operating agreement.
Your LLC is “organized” once an original and one copy of the articles of organization are received by the Corporations Division of the Secretary of State’s office with the appropriate filing fee, and that office confirms that they are in compliance with state requirements. One certified copy of the articles of organization will be retained 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 of some type.
Registered Agent and Office
Every Colorado LLC must have a registered agent in Colorado who is designated to receive official state correspondence from the state, whether bureaucratic or legal. 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 individual or business entity may be appointed as an agent.
Operating Agreement
Next to its articles of organization, the most important document for an LLC 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 requirements for meetings (notice, quorum, voting rules, etc.) and the like, but it doesn’t have 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.
Members
An LLC must have one or more members, and each member must be a natural person or a recognized entity. The member may acquire an interest in the LLC at its formation or at a time and in a manner provided for 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 consent and the person’s admission is documented in the LLC’s records.
Member contributions to the LLC can be in cash, property, promissory notes, services previously rendered, or some other obligation to contribute cash, property, or contracts for services to be rendered.
A member can only resign from the LLC under provisions 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 and the address of the reporting 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 last-known business, residence, or mailing address of each member and manager, both past and present
- A copy of the articles of organization with all amendments, together with any powers of attorney
- Copies of the LLC’s federal, state, and local income tax returns and reports, if any, 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:
- Name and address of each member and manager
- Copies of records that would enable a member to determine the relative voting rights, if any, 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 thereto
- 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 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.
Unless you choose for your LLC to be taxed as a corporation, the IRS treats single-member LLCs as sole proprietorships for tax purposes. This means the LLC itself does not pay taxes and does not have to file a tax return. The IRS treats multi-owned LLCs as partnerships for tax purposes, unless you choose for your LLC to be taxed as a corporation. The result of this is that LLC owners each pay taxes on their lawful share of the profits on their personal income tax returns, not the LLC itself.
The tax rate for Colorado LLCs varies, based on Colorado taxable net income.
Your LLC may need to obtain a federal tax identification number (also known as an employment identification number/ EIN), which is similar to an individual’s Social Security Number. In most cases, you won’t need a separate EIN for your LLC if you are the sole owner and the LLC has no employees. However, if you are not the sole owner of the LLC, or if the LLC has employees, the LLC will need a separate EIN to open a bank account and to meet tax filing requirements.
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