In this article, we will guide you step by step on how to open an LLC in Colorado and its benefits.
Let’s get started.
5 Steps to Create an LLC in Colorado
1. Choose a name for your LLC
When creating an LLC, it’s essential to consider that your name:
- Is available for use in the state of Colorado.
- Includes the phrase Limited Liability Company in its full or abbreviated version (LLC, L.L.C, Ltd, Limited, Company, Co).
- Does not contain any words that could be confused with a government entity such as treasury, State Department, or FBI.
- Does not contain restricted words like Attorney or Bank.
Note: If you are interested in creating a website for your company, we advise you to check online if your company name is available as a domain, as failing to do so may result in a website with the name of your company. Even if you do not plan to create a website at this time, acquiring the URL may be prudent to prevent others from obtaining it in the future.
2. Have a registered agent
A registered agent acts as the person or entity responsible for receiving the legal correspondence of your company, including:
- Tax forms.
- Important reminders.
- Legal documents.
- Official government correspondence.
- Lawsuit notices.
- Legal process notifications.
All Colorado LLCs must appoint a registered agent, who is the primary contact of the company with the state. One of their main functions is to notify and receive lawsuits in case the company is sued.
To create your LLC in Colorado, the registered agent must:
- Be at least 18 years old.
- Have a physical address in Colorado.
- Be available during business hours to receive legal notifications.
3. Articles of Organization
The Articles of Organization in Colorado is an essential document filed with the Secretary of State to establish an LLC. The fee for filing it is $50 USD if you do it online.
4. Operating Agreement
This step is not mandatory in Colorado, but it’s recommended to have one to ensure that all members are in agreement.
The operating agreement is an internal document kept in your business records.
It lists the members of the LLC with their respective ownership interests. It defines how day-to-day operations, decisions, and conflicts among members are handled.
Additionally, it details profit and loss distribution, how taxes are handled, and the administration of the business.
5. Apply for your Employer Identification Number (EIN)
The EIN, or Employer Identification Number, is a unique identifier issued to business entities for easy identification by the IRS. This number is essential for various functions, such as:
- Filing taxes.
- Opening bank accounts.
- Applying for licenses and permits.
- And more.
To obtain an EIN, you need to complete Form SS-4 and submit it to the IRS by mail or fax. Then, you just have to wait for the approval of your application.
If you are a foreigner and don’t have an EIN, you first need to apply for an ITIN number. With this number, you can request your Federal Tax Identification Number needed for your business activities in the United States.
Advantages of Forming an LLC in Colorado
An LLC is not subject to the ownership restrictions imposed on small corporate businesses.
Variety of Members
An LLC in Colorado can have from a single member to over 100. Interests can be held by corporations, partnerships, non-resident aliens, trusts, pension plans, and charitable organizations.
Special Allocations and Affiliations
An LLC can make special allocations, avoiding the single class of stock requirement applicable to S corporations. It can also own more than 80% of the stock of a corporation, allowing for its affiliation with an affiliated group.
Hybrid Entity and Limited Liability Protection
The LLC is a highly flexible hybrid entity. It can be taxed as a partnership, corporation, or sole proprietor, while providing limited liability protection to all its members.
Tax Implications and Limited Liability
For federal tax purposes, an LLC’s income and losses are taxed at the member level, either as a partnership or sole proprietor. Despite this, all members enjoy limited liability protection, meaning they are not personally held responsible for the debts and claims against the LLC.
Need Help Opening an LLC in Colorado?
At Rex Legal, we can assist you with the entire process of forming a Limited Liability Company in Colorado.
If you need our assistance, contact us here.