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Limited Liability Companies in Colorado

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 actually mean to or not.  When forming the actual entity though many business owners are unaware of the statutory requirements to form the business in Colorado.  The article below has been prepared by a business attorney to provide information regarding the necessary requirements, but please remember to always consult directly with your business attorney.

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 true name and mailing address of the persons that are forming the LLC;
  • Whether the LLC is a member managed or 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 permit but does not require the article to disclose any other matter related to the LLC or the articles of organization that the persons forming the business determine to include in the articles.

Other Partnerships

A simple handshake can for a general partnership in Colorado, and no filing with the Colorado Secretary of State is necessary.  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 even intending to do so!

Limited partnerships, however, require the filing of a certificate with the Colorado Secretary of State.  All of the general partners must approve the filing of certificate of limited partnership.  A limited partnership will be governed by CULPA or CUPL, but limited partnerships formed on or before August 10, 2016 that does 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.

The above article was prepared by John McGuire, a business attorney at The McGuire Law Firm.  Please consult directly with your business attorney or other advisors regarding your specific issues.

Common Capital Contributions to a Partnership

When forming a partnership the partners will make initial capital contributions and may make additional contributions depending upon the operations of the partnership and partnership agreement.  Common capital contributions may include cash, property (vehicles, equipment, computers etc.) and sometimes services.

The video below has been prepared by a tax attorney and business attorney at The McGuire Law Firm to discuss capital contributions.

John R. McGuire is tax attorney and business attorney at The McGuire Law Firm.  The McGuire Law Firm represents and advises clients on tax matters from IRS debts and tax audits or overall tax planning and the tax implications of certain transactions.  Further, the firm represents small and medium sized business with their contract issues as well as the formation and sale of businesses or business interests.  In addition to his law degree, John holds an advanced degree in taxation known as an LL.M.  The McGuire LAw Firm provides a free consultation with a tax attorney.

What is a Limited Partnership?

What is a limited partnership? Previously, a Denver business attorney from The McGuire Law Firm has discussed certain types of entities including partnerships in previous articles.  The article below will discuss a limited partnership.

A limited partnership could be considered a type of hybrid business structure because there are multiple types of partners/members. In a limited partnership there must be at least one partner who is liable for the debts of the partnership, and other business obligations.  Additionally, there must be at least one limited partner who is not liable and responsible for the business.  In comparison to a general partnership, a limited partnership cannot be formed simply by conduct.  Remember, a general partnership can be formed when two or more people begin conducting business for a profit.  A limited partnership must file the appropriate forms and papers with the necessary state agency such as the secretary of state.

The general partner will have management authority and will thus operate and manage the partnership and related business affairs.  The limited partner acts more as a passive investor, and does not have the responsibility of managing the business.  Thus, what can you compare a limited partner to?  In many respects, a limited partner is similar to a shareholder in a corporation.  The limited partner invests in the partnership and under the worst case scenario they may lose their investment, but such limited partner is not responsible for the debts and obligations of the partnership.  If a limited partner does exert too much control or dominance over the general partner or general partners, the limited partner could actually be liable for the business debts.  By exerting such control, the limited partner has de facto become a general partner of the limited partnership and thus exposed themselves to liability.  Different acts control such issues within a limited partnership and state law and case law should always be researched and reviewed.  Many current laws also allow business agreements that tailor the relationship between the partners and between the partners and the business. This may include tailoring the fiduciary duties a partner may have to the partnership and a partner not being liable for a breach of a fiduciary duty when one would expect such partner to be liable.  In many respects, it appears the fiduciary duties of a partner in a limited partnership can be limited more so than in a general partnership.

For tax purposes, a limited partnership is a pass through entity whereby the entity is not taxed, but items are passed through to the individual partners.

The one major drawback to the limited partnership is the exposure to the general partner.  Thus, most general partners within a limited partnership today would be corporations.  Because of the limited liability afforded to those who own and run the corporation, a limited partnership with a corporate general partner should help prevent personal exposure.

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Member Managed LLC

A limited liability company (LLC) can be managed by a manger or managers, or the LLC can be managed by the members of the LLC.  There are advantages to both depending upon the circumstances of the business, the knowledge of the members, the involvement of the members and other issues.  For example, the members of a certain LLC may all be passive investors of the LLC and have little knowledge regarding the operations of the LLC.  Thus, it may be best to hire a professional manager or individual that has better know how regarding the subject matter or area in which the LLC is operating.  Furthermore, the members of an LLC may have no interest and not want to manage the LLC and thus hiring a manager or managers maybe more prudent.  On the flip side, the LLC may have a small number of members and the members are well versed and experienced in terms of operating a business and the area in which the LLC is operating.  Under such circumstances, it is likely the members themselves would want to manage the LLC.

In Colorado, you state whether the LLC is member managed or manager managed within the Articles of Organization.  The operating agreement of the LLC will state and control the powers of the manager or managers, or the members as they manage the LLC.  It is recommended that the managers responsibilities and powers be well defined in the LLC operating agreement.

The video below has been prepared by a Denver business attorney to provide more information regarding the management structure and options of an LLC.  Please remember this article and video are for informational purposes.  It is recommended that you speak with your business attorney regarding the management structure of your business.

Contact The McGuire Law Firm to discuss your business questions and issues with a Denver business attorney.  A free consultation is offered to all potential clients!