Limited Liability Company And Colorado’s Requirements
A limited liability company (LLC) is a popular choice of entity for many business owners in Colorado. Further, many business owners in Colorado will form other forms of partnerships, whether they mean to or not. When forming the actual entity, many business owners are unaware of the statutory requirements to form the business in Colorado. A Denver business attorney has prepared the article below to provide information regarding the requirements, but please remember to consult directly with your business attorney.
Starting an LLC in Colorado
There are four different ways to form an LLC in Colorado. You can do it online, over the phone, via mail, or in person. To start one, you must file Articles of Organization with the state. The process takes about 10 minutes and costs $75. You can find out how to do it here. Once you’ve done that, you’ll need to register your LLC with the IRS. This is free, and it takes a few days. You can find out more information here.
Next, you’ll need to open a bank account. Starting a sole proprietorship, you’ll need to use a checking account. An LLC needs a savings account. You can set up a separate savings account for your LLC under its name, just like you would for a regular business. You’ll need to provide proof of identity, physical address, and photo ID to open a savings account. You can learn more about opening a savings account here.
Once you have checking and savings accounts, you can choose whether or not to issue stock. Stock is ownership shares of the company. Each owner gets one vote per share. If you decide to issue stock, you’ll need to pay $25 for each class of stock you want to issue. For example, if you wanted to issue five classes of stock, you’d pay $125. There are no limits to the number of classes you can issue; however, there are limits to the amount of money you can raise.
You can learn more about how much you can raise here. Finally, you’ll need to fill out a federal tax return. This is called Form SS-4. You can download a copy of this form here.
If you follow those steps, you’ll be ready to go. But keep in mind that once you open your LLC, you won’t be able to operate without filing additional paperwork with the state. And even though you don’t owe taxes now, you still need to file quarterly returns with the IRS.
Forming An LLC
In Colorado, a limited liability company is formed by filing articles of organization with the Colorado Secretary of State. The articles of organization must provide the following:
- The LLCs name and principal office address:
- The name and address of the registered agent;
- The proper name and mailing address of the persons that are forming the LLC;
- Whether the LLC is member-managed or a member-managed LLC; and,
- That there is at least one (1) member of the LLC.
Section 7-80-204(1)(h) of the Colorado Revised Statutes also permits but does not require the article to disclose any other matter relating to the LLC or the articles of organization that the persons forming the business determine to include in the articles.
Colorado LLC or Colorado LLP?
A limited liability company (LLC) and a limited liability partnership (LLP) are both legal entities that allow individuals to form businesses without filing articles of incorporation or formation documents. A limited liability company (LLL) is similar to a corporation, while a limited liability partnership (LPL) operates like a general partnership. Both types of companies offer limited liability protection to owners and managers.
There are many differences between LLCs and LLPs, including how each entity is taxed. However, one significant difference is that LLCs can operate across state lines, whereas LLPs cannot. In addition, LLCs can issue stock, while LLPs cannot. If you want to start a small business, consider forming a Colorado LLC.
Section 7-64-202(1) of the Colorado Revised Statutes states, “the association of two or more persons to carry on as co-owners a business for profit forms a partnership, whether or not the persons intend to form a partnership. Thus, you can form a partnership and expose yourself to liability without intending to do so!
Limited partnerships require filing a certificate with the Colorado Secretary of State. All of the general partners must approve the filing of certificates of the limited partnership. CULPA or CUPL will govern a limited partnership, but limited partnerships formed on or before August 10, 2016, that do not elect to be governed by CUPA will be governed by CUPL for issues not covered by CULPA. The information required on the limited partnership certificate is:
- The name of the limited partnership and the initial and principal address of the limited partnership;
- Name and address of the registered agent;
- The name and mailing address of each general partner LLC; and,
- That there are at least two partners in the partnership, and at least one of them is a general partner.
One should also note that a general partnership may become a limited liability partnership (LLP), and limited partnerships may become a limited liability limited partnership (LLLP) by filing a registration statement with the Colorado secretary of state.
Foreign State Recognition
A foreign LLC is treated differently than a domestic LLC in most states. A foreign LLC must file articles of organization with the Secretary of State in every state where it intends to do business. In addition, the foreign LLC must register in every state where it does business. These steps are required regardless of whether the LLC is formed in the United States or overseas. If the LLC is registered in one state but not in others, it is considered domiciled in that state.
The LLC’s status as a foreign entity makes it subject to additional requirements imposed by some states. For example, many states require foreign entities to obtain licenses or permits, pay taxes, provide information about ownership interests, and comply with laws regarding corporate governance and conflicts of interest.
In contrast, domestic LLCs are recognized in all 50 states without action. Once a domestic LLC files articles of organization with the secretary of state, it is automatically deemed valid and enforceable throughout the United States.
Need Further Assistance?
The above article was prepared by John McGuire, a Denver business attorney and tax attorney at The McGuire Law Firm. Please consult your business attorney or other advisors regarding your specific issues.