Are you thinking about starting an LLC? In this article, we’ll discuss the advantages of an LLC and how it will benefit your business in the short and long term.
Then I will walk you through the entire registration process.
However, if you are nervous about the filing process and would prefer professionals handle it to ensure your documents are filed correctly, look into a service like IncFile (for $49) or LegalZoom (for $149). Both services use online questionnaires that will take you less than 15 minutes to fill out. Once you have completed the questionnaires, they take care of the rest.
If you’d like to handle the incorporation process yourself, keep reading for our step-by-step guide.
A Limited Liability Company will give you Limited Liability as an owner. Since your Colorado small business is independent from your personal assets, you are not personally responsible if you encounter a lawsuit.
In that event, creditors and financial institutions will not be able to seize your personal assets, as they are protected by state law. Other structures, such as sole proprietorship and partnership, do not offer this type of protection.
This is one of the best advantages when forming an LLC in Colorado. Who doesn’t want to save on taxes and receive tax benefits? Your Colorado LLC is not considered a separate entity, therefore, the IRS will not tax your business initially.
This is where the special privilege comes in, as you will be given the option on how you want to be taxed. You can choose to be taxed in one of the following methods: Single member LLC, Partners in an LLC or LLC filing as a corporation. Consult your attorney to fully understand the terms and conditions for these three options.
Another advantage of owning a Colorado LLC is that you can determine how you will form the management structure of your business. You don’t have to follow the rules set in Corporations, where the Board of Directors is manages the company and make decisions.
An LLC can be run by the owners themselves or by hired managers. The best arrangement is one that is agreed upon by all business owners.
LLC’s have very few state-imposed requirements as compared to other structures. This makes it the top choice for new entrepreneurs. LLCs require lesser annual requirements and ongoing formalities.
In addition, you don’t have to keep up with as much paperwork, as an LLC is highly flexible. You can run your business based on what you want, in short – you make your own set of rules to follow. If you don’t make your own rules, you’ll have to follow Colorado’s default rules.
With less compliance requirements and paperwork to handle, LLCs are one of the best and easiest structures to form.
Before investors, customers and employees fully commit to your business, they will want to know that they are dealing with a legitimate and reputable company that is legally recognized by the state of Colorado. One way to gain their trust is to incorporate by forming an LLC.
IncFile is $100 more affordable than other LLC filing services & twice as fast
Forming an LLC in Colorado can be confusing for the first-time business owner. To simplify the process, we’ve prepared an easy-to-follow five-step process to assist you in forming your LLC, as based on state guidelines.
There are naming guidelines to follow when forming an LLC. First, your business name must contain the abbreviations, L.L.C. or LLC, or the full word Limited Liability Company.
Second, your LLC name must not contain words that may confuse the public, for instance, Banc and Bank, or professional titles which include Doctor, Attorney and the like. Adding these words may require more paperwork. You can learn more about naming prohibitions by visiting the Colorado State Website.
To search for business name availability, visit the State of Colorado webpage.
A Registered Agent will play a big role in your business. This professional will be your representative, and will receive legal documents and paperwork on your behalf. They will also be in-charge of sorting and prioritizing documents, and giving you a heads-up if something needs immediate attention.
Hiring the right Registered Agent is a legal requirement, however it can sometimes be expensive. If you want to save money while receiving quality service, I suggest that you incorporate your Colorado LLC with IncFile. IncFile is $100 less than other online incorporation services and will give you a free Registered Agent.
This step is essential! To begin your registration as an LLC, apply online by filling out the form which you can find here.
To help you fill out the form correctly, view sample PDF files of Articles of Incorporation. Once completed, file your form before the Colorado Secretary of State. There is a $50 filing fee.
An Employer Identification Number (EIN), also known as Federal Tax Identification Number, is similar to a Social Security Number for individuals. The EIN is the Internal Revenue Service’ way of tracking your business activities and taxes.
Aside from being a requirement by the IRS, the EIN is also allows you to open a business bank account and hire employees for your LLC. You can get the EIN from the IRS for free. You can do this is two ways: through online application or through mail.
As explained in this guide, an LLC is flexible – from taxes to management structure and even requirements and paperwork – forming and maintaining an LLC is easy.
However, because of the flexibility of running an LLC, misunderstandings and conflicts may also arise. This is where an operating agreement is needed.
An operating agreement is an essential legal document that properly states the ownership and operating procedures for your Colorado LLC. An operating agreement will enable you to create a financial/working relationships with your co-owners. This document is not a mandatory requirement to form an LLC, but it’s best practice to create one.
Your responsibility doesn’t just end after forming an LLC in Colorado; you’ve got a few more things to do before you can fully launch. Check out the next steps here!
Creating a game plan for your business is not a mandatory requirement when starting an LLC in Colorado, however I highly suggest that you create one. A plan increases your chances of long term success while allowing you to start your business with ease.
Knowing where to start, where to go and what to do in the future is reassuring. If you want to learn how to write a professional and solid business plan, here are two reliable resources that you can use.
When starting a business in Colorado, you agree to pay all state taxes that are required from you. Failure to do so may lead to penalties or your business being shut down.
For help understanding tax regulations and know your responsibilities, check out this quick guide.
You need to comply with necessary licenses and permits to operate legally. Numerous licenses and permits are required, and are contingent upon your business type. To obtain more information related to your specific business need, visit your city hall and schedule a consultation time.
You can also read this helpful guide to understand your responsibilities as a business owner and learn the process of obtaining your company’s requirements.
This guide is not meant to replace any advice given by your legal team or lawyer. If you want to learn more specific information or things not discussed in this guide, you can directly address them to your lawyer.