How to Start an LLC in Colorado

Colorado’s booming economy, low startup costs, and business-friendly laws makes it a great choice for anyone looking to start a business. The state also boasts an impressive new business survival rate. Learn all the steps you need to take to form an LLC and what you should do afterwards, so you, too, can embrace all that the Centennial State has to offer. 

How to get an LLC in Colorado in 6 steps

A limited liability company (LLC) offers liability protection and tax advantages, among other benefits for small businesses. These steps have all the info you need to get your LLC up and running in Colorado.

Step 1: Name your Colorado LLC

You'll need to choose an LLC name that’s unique and distinguishable before you can register your LLC. Colorado also has some business entity naming rules that you need to follow. Most of the business name rules are similar to other states, such as requiring an appropriate designator like "limited liability company,” “ltd.," “LLC,” or “limited liability co.” 

When you decide on a business name, there are also some restricted words:

• You may not use words that imply affiliation with any federal or state government agency
• Words such as bank, credit union, lawyer, trustee, or Olympic need approval or licenses from the appropriate authorities

Once you’ve found an LLC name, you can use Colorado Secretary of State Name Availability Search to see if it is not in use by another business. This database will not show similar business names. To find similar entity names, use the state’s Business Database Search. 

Optional: Reserve a business name

If you aren't ready to form your LLC immediately but are concerned your name might be taken by someone else, you can reserve it for a reservation filing fee of $25. In Colorado, names may be reserved for 120 days by paying and submitting a Statement of Reservation of Name online with the Colorado Secretary of State. You extend this name reservation for another 120 days by filing the Statement of Renewal of Reservation of Name. 

Step 2: Choose your registered agent 

A registered agent is the person or entity authorized to receive service of process and other official legal documents and notices on behalf of your LLC. Colorado requires you to appoint a registered agent for your LLC or they won’t accept your formation documents. 

Your Colorado registered agent performs a variety of duties for your business. They are the official point of contact for all correspondence and legal messages from government agencies, such as the Colorado Secretary of State or Department of Revenue. A registered agent must be available during regular business hours, typically 9 a.m. to 5 p.m..

In Colorado, a registered agent can be:

• An individual, company authorized to do business in the state, or another legal entity (LLC, LLP, or Corporation). 
• If the registered agent is a person, they must be above 18 and a state resident. 
• The registered agent must provide a physical address in the state where they can be reached in person (no P.O. boxes). 

Technically you can be your own registered agent, but as you learn more you will learn why it’s probably not the wisest move. LegalZoom’s Registered Agent Services make it easy to satisfy this Colorado LLC formation requirement while providing privacy and security. Our registered agent service provides unlimited digital document storage and we'll also notify you of any communication that needs your immediate attention.

Step 3: Prepare and file articles of organization

The articles of organization, also known as a certificate of formation, is a form you file with the Colorado Secretary of State that officially establishes your single-member or multi-member LLC by laying out basic information about it.

To prepare articles of organization and file them with the Colorado Secretary of State, you'll usually need the following information:

• LLC’s name and principal address (must be a street address)
• LLC’s mailing address
• Registered agent name and address
• Management structure (manager-managed or member-managed)
• A statement that the LLC will be run by at least one member
• The name and address of the person filing the LLC the articles
• The effective date for the formation of the LLC
• Signature of the person forming the LLC

Colorado only accepts online filings. The state filing fees of $50 must be paid via credit card, debit card, or a prepaid account. 

When your Colorado articles of organization are approved, the LLC becomes a legal business entity, and the Colorado Secretary of State will give you a business ID number. This number is not your federal employer identification number (FEIN). 

Step 4: Create an operating agreement

Although it’s not required, having a Colorado LLC operating agreement adds legitimacy and credibility to your company, while laying the blueprint for business operations. An LLC operating agreement is also useful in settling disputes that may arise over financial agreements and other potential litigation. Without an operating agreement, the Colorado courts will make determinations on legal disputes based on state law, and not necessarily what is in the best interest of the LLC and its members.

While you can develop your own operating agreement, it’s better to get legal advice to ensure you’ve covered all the essential elements. LegalZoom, through its network of business lawyers, can tailor an operating agreement to your specific needs.

Step 5: Get an employer identification number (EIN) and open a business bank account

The Internal Revenue Service (IRS) uses the employer identification number (EIN) to identify businesses for tax purposes. An EIN is also needed to a business bank account and hire employees. While LLC owners can use their Social Security number (SSN) for business tax purposes (since LLCs are pass-through entities), it’s often safer and better to use an EIN. 

LegalZoom’s EIN service can save you from filing and tracking one more form as you set up your Colorado LLC. We guarantee 100% accurate filing and will notify you as soon as we have your EIN with official documentation. 

Open a business bank account 

When you open a business bank account for your Colorado LLC, you strengthen the distinction between you and your business, automatically increasing your personal liability protection. An account dedicated to your business entity makes tracking sales and expenses, claiming deductions, and making financial projections a whole lot simpler. Investors and other funders also look more favorable upon businesses that don’t intermingle their personal and business finances.

Step 6: Register for taxes and Colorado business licenses

Every Colorado LLC has tax obligations. After getting your approved formation documents, go to the Colorado Department of Revenue and apply for the appropriate taxes. 

Taxes your business may be subjected do include: 

• State income tax: A flat rate of 4.25% charged on all business profits, which is reported on LLC owner’s personal income tax returns. 
• Sales and use tax: Sometimes also called a reseller’s permit or a business license. You can apply for this sales tax license online and the registration is valid for two years. 
• Payroll tax: If you plan to hire employees you must register with the Colorado Department of Revenue for Wage Withholding Tax. This will ensure you can withhold and remit the right employment taxes behalf of your employees. 
• Local taxes: Certain cities or counties impose special taxes. Contact your local authority to find your local tax obligations. 
• Industry-specific taxes: Some regulated industries have additional tax requirements. In Colorado, the Retail Marijuana Sales Tax is 15%, while the Tobacco Product Excise Tax is 56%. 

Secure correct business licenses

There are no general business licensing requirements in Colorado, however, depending on the nature of your business, additional or specialized permits or licenses may be required. Common licenses and permits range from zoning permits and health permits to signage and occupational licenses. Some licenses are issued at the state level and others are issued at the city or county level. For instance, liquor licenses are issued by the Liquor and Tobacco Enforcement Division, but you’d also need a license from your local government. 

Two good resources for this information are The Division of Professions and Occupations and Colorado Department of Regulatory Agencies (DORA). You can also get all the information in one place by using an online Business License Lookup Service. 

Next steps after forming your Colorado LLC

Now that your Colorado LLC is a legal entity, you can focus on a few administrative matters that will build a rock solid foundation for your business. 

Build a website and register a domain name

Not having a website for your LLC in Colorado can lead customers to question your business’ credibility. A professional website can be your 24/7 marketing and sales representative, generating visibility and revenue. Professional website builders like Wix or Wordpress make it simple to create a website. 

An important part of creating a website is having a matching domain name (what customers enter into the URL bar). A matching domain name reduces customer confusion and guides them directly to your digital space. 

Obtain a certificate of good standing

A certificate of good standing is like a performance report. It shows the world that you’re abiding by state regulatory requirements by paying taxes and filing your annual report.  

Here’s the best part—in Colorado, it’s free to request a certificate of good standing online. Go to the Business Organizations page and search for your business by name or entity number.  Once you’ve found your company, click on the “Get a Certificate of Good Standing” icon. A PDF version will be immediately available for download and print. 

Consider a foreign LLC

If your business expands beyond Colorado’s state borders or the majority of your online customers are from other states, it may mean that you’re a “foreign LLC” in those states. If either of those situations rings true, it’s important you have the legal authority to operate there. 

To gain legal authority, you must register as a foreign LLC in every state where you conduct business outside of Colorado. Getting foreign qualification requires a fair amount of work, like obtaining a certificate of existence and then meeting the new state’s requirements.

Buy business insurance

Without business insurance, you’ll personally have to pay for any unexpected expenses and claims that stem from running a business. For instance, say a customer slips and injures their wrist because you missed properly drying an area while cleaning. They can file a personal injury case against you, and you would be on the hook for paying the entire amount of damages. 

General liability insurance is a must have for all business entities. Depending on the size and kind of LLC you're operating, you may require additional coverage. For instance, if you are running a professional LLC offering accounting services, it’s best to purchase professional liability insurance. 

Annual filing requirements for Colorado LLCs

Annual reports—called periodic reports in Colorado—contain high-level information on your business. All LLCs in Colorado are required to file this report and pay a $25 filing fee to remain in good standing with the Colorado Secretary of State. The periodic report must be filed online through the Secretary of State website. 

The periodic reports are due during the three-month period beginning on the first day of the anniversary month when the LLC was formed. If you miss filing this periodic report, your Colorado LLC may lose its active status. LegalZoom can file the annual report on behalf of your LLC each year so you can focus on what you do best—getting customers and driving business. 

Cost of forming an LLC in Colorado

The minimum cost of forming an LLC in Colorado is $50—your state filing fees. However, there could be other expenses that can raise this number to $200–$300. 

• Filing fees. Colorado articles of organization cost $50 for a domestic LLC. The filing fees for a foreign llc in Colorado is $100.
• Registered agent services. A registered agent service can cost between $50–$300, depending on additional services they provide (such as sorting documents and sending reminders for compliance paperwork).
• Business licenses. The state's sales tax license is between $4–$16. The cost of other business licenses vary by city, business size, and number of employees. In the city of Colorado Springs, most business licenses are around $110. Other cities, such as Durango, have licenses starting at $30.
• Business insurance. Insurance cost again depends on policy purchased (general, professional, or product liability), coverage required, business size, and industry. According to NEXT Insurance, general liability insurance for a small business runs around $45.
• Legal fees. If you choose to work with a lawyer for the formation of your LLC in Colorado, you can expect the lawyer to charge around $261 per hour. Some lawyers charge a flat rate for a one-time job like filing articles of organization or drafting an operating agreement. LegalZoom’s LLC formation service starts at $0 plus filing fees.

How to start your Colorado LLC with LegalZoom

It takes a lot to go from a business idea to a full-fledged legal reality. Even though it's just seven steps to form a Colorado LLC, a lot can go wrong. For instance, you can make a filing error or forget to get a federal tax identification number. LegalZoom makes your Colorado LLC formation simple and stress-free. We take care of the small details and guide you through the formation process of your Colorado LLC properly.

FAQs

What are the benefits of registering an LLC?

There are several advantages of registering as an LLC vs. a corporation or a sole proprietorship. For instance, an LLC offers some liability protection—meaning, your personal assets are somewhat protected from business debts and losses. The IRS looks at LLC as pass-through entities, therefore you can escape the double taxation faced by corporations. The management structure of an LLC is also more flexible and has fewer compliance requirements.

A business attorney or formation company can help you understand the pros and cons of each legal structure so you can pick what's best for you.

Do I need a business license for my CO LLC?

LLCs in Colorado don't have to get a general business license at the state level. But you may be required to have a business license at your city or county level. 

How do I correct filing errors in CO? 

Colorado allows the correction of filing errors—such as a spelling mistake in business name or historical information—online. You need to search for your business entity on the Secretary of State business portal and select the correction you wish to make.  

How long does it take to form an LLC in Colorado?

All applications filed online, including articles of organization and name reservation forms, are processed immediately. Mailed-in documents are generally processed within seven to 10 business days.

How do I dissolve an LLC in Colorado?

If you think it’s time to call it a day on your LLC in Colorado, you need to officially dissolve it. To dissolve your LLC, you need to first vote to dissolve it. After all members are in agreement, you can file your Statement of Dissolution online and pay the $10 fee. Only after you file your dissolution papers will you be free from your annual reporting and tax compliance duties.

Rudri Bhatt Patel contributed to this article.