Starting LLC in Colorado: Peculiarities & Detailed Manual
Want to start an LLC in Colorado? It is a profitable decision for a business, as the state has waived corporate tax in favor of gross corporate income tax. So you’ve decided to start an LLC? Not sure how to initiate the process? To start an LLC in Colorado, you need to get ready for several stages.
We’ve prepared a guide for you with just six steps to form your LLC and to get success! You can also refer to the virtual LLC formation service.
Note: ZenBusiness is the best service to file the LLC. You’ll surely appreciate reasonable prices, company values, and other peculiarities.
An Colorado LLC: The Notion & Essence
Many Colorado business owners choose to start an LLC. So, unlike a corporation, they can take advantage of flexible management. We’re talking about the protection of personal assets that sole proprietorships and general partnerships lack.
The state of Colorado puts forward simplified requirements for registration and maintenance of LLC and invites business owners to choose the type of taxation. Do you still have doubts about the LLC?
6 Stages to Form an LLC Correctly
Stage №1: Choose Your LLC Name
The LLC name is a significant aspect, as it is the name of your company that makes the first and strongest impression on the audience of your potential customers! The name must be different from existing company names and must meet Colorado’s regulatory requirements. Now get started with the following aspects.
LLC name in terms of jurisdiction
The State of Colorado obliges business owners to include the abbreviation DDS or the phrase – limited liability company in the name. Please note that the terms corporation or registered are prohibited. In addition, you cannot use the designations of other forms of business: banks or law firms.
Take care of the explanations
You must include in the title an explanation of the nature of your business. For example, if you are engaged in the computers’ repairing, write in the LLC title – computer wizard. If you have any values or principles, also indicate this. For example, if you are farming, use the term natural, nitrate-free, etc.
So, you need to get a little creative and fully comply with Colorado’s legal requirements.
Stage №2: Hire a Registered Agent
A registered agent is called a statutory agent in Colorado and will help you to start an LLC. The agent can be an Colorado resident, natural or legal attorney responsible for sending and receiving legal documentation on behalf of the future company. A company representative can also be an employee of the company or its owner.
The registered agent of an LLC can be either a private person (not necessarily a founder or a manager of the company) or an organization responsible for receiving services and processes for the company. The responsibility of the registered agent consists of forwarding the process or service to the company.
Note. In the state of Colorado, a business owner can serve as a registered agent for his enterprise or assign another person who’s 18 years old or older and who has a permanent address inside the state. The registered agent should be present during regular working hours from Monday to Friday.
A registered agent guarantees an excellent reputation for your Colorado LLC. Also, if your business gets worse, Colorado can take legal action against it without notifying you. The registered agent will always receive appropriate notification and will be able to take timely measures to protect your interests as an attorney.
You should apply to the online service to get started a business in compliance with all regulations and requirements. So, you will have the opportunity to filter spam and protect your personal and contact information. If you use the ZenBusiness and Northwest Registered Agent to form an LLC, you will receive the free services of a registered agent.
Stage №3: Applying for Registration
To register a business in Colorado, you must file the Articles of Association with the Colorado State Secretariat. If you are anxious about your LLC formation, you can submit your documents for pre-processing, which will allow the Secretary of State’s office to advise you of the eligibility. It can be a good option if you get started for the first time in an LLC without consulting an attorney. Be sure to provide:
- The desired name of your business.
- Personal and contact details of the registered agent.
- Business management form.
- Personal and contact details of the manager of your company.
- Signature of the applicant and registered agent.
- Date of application submission.
In Colorado, there are no paper filing methods for the documents you need for opening an LLC so that you can fill this form online.
Cost to form an LLC: You should pay a fee of $50 to open an LLC in Colorado.
Processing time: The state will need 7-10 working days to finalize the processing of the documents for your LLC formation and send the documents back to you. Nevertheless, most of the filings are completed electronically and processed within just one working day. Please consider that the counting of working days begins only when all the documents are put in order and filled out appropriately.
Stage №4: The Operating Agreement Background
While an operating agreement is not binding in Colorado, creating one could significantly improve the company’s climate. An operating agreement is a document that describes the structure of a project, the way it works, the rights and obligations of each partner.
This document reflects the consistency of partners and thereby reduces the chance of controversy and disputes. Therefore, it is significant that all members of the future LLC carefully read this document before joining the company.
An attorney can help draw up an operating agreement and determine the way income and liabilities will be distributed among the owners of your LLC. You will find more information about the operating agreement here. Prepare to enter the following information:
- Names of all participants.
- The rights and obligations of each of the listed participants.
- Description of procedures for voting or resolving differences between members.
- Regulations on the financial share of participation of LLC members.
- Description of the way you’re going to manage the LLC.
So, do not neglect this stage of LLC formation. It largely guarantees your safety and the observance of your rights by all members of the business project.
Stage №5: Tax Compliance
To conduct a business that you want to register as an LLC successfully, you need to comply with several tax requirements at various levels.
Requirements of Federal Significance
Does your LLC involve multiple owners? Then you need to take care of the EIN! The EIN, or Employer Identification Number, is a unique nine-digit number assigned by the IRS to US corporations. This number must be obtained by all business owners under whose leadership the hired employees work. A business owner can obtain an EIN from the IRS in person or by mail.
Your state’s cess requirements
In Colorado, the amount of LLC taxes depends on the field of your business. And the income tax is considered the most important. The amount of income taxes you have to pay also depends on the type of your business.
For example, if your company represents a pass-through entity (a partnership or individual ownership), your will pay your LLC’s taxes on individual tax refunds every year. And if your company is registered as a corporation, it will be subject to corporate taxes (you can know more about this type of tax on the site of the Colorado General Assembly).
If your LLC is specialized in the sales or rentals of goods, it will be subject to sales tax. Colorado, unlike other states, applies taxes only on sold or rented properties but not on services. You can obtain a Sales Tax License with the help of this platform.
In Colorado, every LLC that has employees must pay unemployment insurance taxes. The general tax rate is 0,0208% per every $11,700 earned by an employee, but in specific fields (such as construction), this rate can be higher). You can get more information about the unemployment insurance tax on this page. The enterprises that use wage labor must pay employee withholding taxes as well, and you can learn more about this type of tax on this site.
Local Tax Business Demands
You may also be obliged to pay some local taxes, depending on where exactly your business is located. For example, some cities in Colorado collect additional sales taxes or use taxes that generally aren’t levied by the state.
To get more detailed information about the local LLC taxes in your area, consult a government agency in your city or contact a Colorado Tax Examiner at 303-238-7378. Local taxes can be a critical moment for your business; you shouldn’t underestimate them.
Stage №6: Getting Business Licenses & Permits
In Colorado, there’s no general business license that every LLC should acquire.
Nevertheless, specific federally-regulated fields (fisheries, aviation, nuclear energy, and more) should obtain a license to function. You can see a complete list of these fields on the resource made by the Small Business Administration. Check it out to make sure you acquired all the necessary licenses.
In addition, Colorado regulates some industries that vary from barbers to acupuncture and chiropractors. You can get to know which licenses apply to your company and register for these licenses using this resource.
Other Stages for Business Owners After LLC Registration
After completing the six mandatory steps towards starting an LLC, you need to take care of the following.
Opening a business bank account
Separate your personal and LLC accounts. Thus, you will be sure of the safety of your personal and financial data. Besides, you won’t have any hassle when filing your charge returns. Your EIN will help you open a business account quickly, no matter what you choose a bank or credit union.
Business Insurance
All owners of companies/corporations, regardless of their form of management that attracts employees, must go through the compensation insurance procedure. All basic and detailed information is available with the Colorado Bureau of Workers’ Compensation.
This policy aims to protect the rights of workers who are injured at work and unable to work. It will not be superfluous to get a civil liability insurance policy, as well as pay attention to some other types of insurance.
Income reporting
Every LLC in Colorado must report its income, no matter whether it regained or lost money. The filing forms for this type of report depend on the structure of your business organization. Pass-through entities can find the required documents here; corporations can see theirs here.
Referring to the services of a qualified accountant
According to the laws of Colorado, every company must file an annual report. You can file it online with the help of this service. The fee is equal to $10, and it’s charged yearly within three months of the anniversary of your LLC foundation.
Make sure you file your report on time, else you will be obliged to pay $50 for late reporting. The objective of your annual report is to inform the state about all the changes that happen with your business over the year.