Limited liability companies (LLC) have been very popular entity choices in recent times. An LLC can be very flexible in terms of profit, loss and other item allocation, and other membership issues. However, as a business attorney, I am often asked, how do I form an LLC? Thus, I have drafted the article below to provide some general information regarding the formation of an LLC, articles of organization and general tax matters to consider.
To form an LLC in Colorado, you can go to the Colorado Secretary of State website to complete and file your articles of organization. First, you will check on the name for your LLC to see if it is available. Once availability has been checked, you can complete the articles of organization. The articles of organization will state: the name of the LLC; the address of the LLC; the registered agent of the LLC; the members of the LLC and their addresses; who is filing the articles; whether the LLC is member managed or manager managed and other information. Once you have completed the articles, you pay a filing fee, which is currently $50 and the articles are filed with the secretary of state. Typically, you will also pay a yearly renewal fee to the secretary of state.
After completing the articles, you may wish to obtain an EIN depending upon your circumstances. You can obtain an EIN on the IRS’ website. Most banks will now allow you to open a business bank account with your articles of incorporation and EIN.
In most circumstances, if you have a multi-member LLC, it is recommend that you have an operating agreement, which is a partnership agreement and controls certain actions and issues within the LLC and between the LLC members and potentially the LLC manager.
For tax purposes, a multi-member LLC will file a 1065 U.S. Partnership Income Tax Return and the pass through items will be reported to the members on a K-1. A single member LLC is considered a disregarded entity for tax purposes and thus is treated like a sole proprietorship and the individual will file a Schedule C with their 1040 Individual Income Tax Return. It is recommended that you speak with a tax attorney or tax professional regarding the individual tax implications of an LLC, as well as to the tax issues surrounding the formation of the LLC. The formation of an LLC by itself may not create any taxable event, but the contribution of property and/or money to an LLC is likely to have tax consequences in the future that should be understood from the beginning if possible. If you have questions regarding the formation of an LLC, you can contact The McGuire Law Firm to discuss such issues with a business attorney or tax attorney.
Contact The McGuire Law Firm to schedule your free consultation with a business attorney or discuss your individual or business tax questions with a tax attorney. The McGuire Law Firm has law offices in Denver and Golden Colorado.