What is a Colorado LLC?
A Colorado LLC is a type of business structure formed by state law. It can be used to run a business, or it can be used to hold assets like real estate, boats, and planes.
A Colorado LLC can:
- make money
- own/lease property
- enter into contracts
- open a bank account
- sue and be sued
It can be formed by one person or by several people.
An LLC with one owner is a called a Single-Member LLC. An LLC with many owners is called a Multi-Member LLC.
What are the advantages of forming an LLC in Colorado?
There are 2 main advantages to forming a Colorado LLC: personal liability protection and pass-through taxation.
With an LLC, your personal assets are protected from the assets held by your business. This means your personal assets cannot be used to pay off your business’s debts or liabilities in case your LLC gets sued.
An LLC also avoids double taxation. Unlike a Corporation, an LLC does not have to file a separate federal tax return with the IRS.
Instead, your Colorado LLC profits/losses pass through directly to your personal income tax return.
How to start an LLC in Colorado?
There are 5 steps to forming an LLC in Colorado. They are:
- Choose a Name for your LLC
- Select your LLC’s Registered Agent
- File your LLC’s Articles of Organization
- Complete and sign your LLC’s Operating Agreement
- Get your LLC’s EIN (Employer Identification Number)
You’ll also need to do the following every year to keep your LLC in good standing with Colorado:
- File your LLC’s Periodic Report
- File and pay your Colorado Taxes
Forming an LLC in Colorado can only be done online. You can file your Colorado LLC’s Articles of Organization here: Colorado Secretary of State: File a Form
If you need help forming your LLC in Colorado, follow our step-by-step guides.
Do I need a lawyer to form an LLC in Colorado?
No, it’s not a legal requirement to use a lawyer to form your LLC. Forming an LLC in Colorado is simple. You can read our free guides, which will walk you through all the steps.
We’ll teach you how to:
- Choose your LLC name
- Select your LLC’s Registered Agent
- File your LLC Articles of Organization directly with the Secretary of State
You’re also not required to use a lawyer to:
- Draft/complete your LLC’s Operating Agreement
- Get your Employer Identification Number (EIN)
- File a Periodic Report with Colorado
We do recommend consulting with a lawyer if your LLC:
- Requires industry-specific management
- Has complex ownership agreements
- Has many investors or a large amount of members
How do I maintain an LLC in Colorado?
You need to do two things to keep your LLC in Good Standing with Colorado:
- File your Periodic Report
- File and pay any Colorado Taxes
You will be penalized an extra $50 on top of the $10 annual filing fee if you submit your Periodic Report late. Your Colorado LLC will also be marked “Non-compliant”.
You will then be given another 3 months to submit your Periodic Report. If you still fail, your Colorado LLC will be marked “Delinquent”.
If this happens, you will no longer be able to do business in Colorado.
To avoid this, we highly recommend you put a repeating reminder on your calendar.
As for taxes, you will have to register your LLC with the Colorado Department of Revenue after it is approved.
We recommend getting a qualified CPA/accountant to help you file your taxes correctly.
How long does it take to form an LLC in Colorado?
Filling out your Articles of Organization takes about 10 minutes. It is done completely online.
Your Colorado LLC officially exists upon processing and approval of your Articles of Organization. Approval is usually instant.
How many people do I need to form an LLC in Colorado?
You only need 1 person to form an LLC in Colorado, and there is no limit to the number of members your LLC can have.
An LLC with 1 member is called a Single-Member LLC.
An LLC with 2 or more members is called a Multi-Member LLC.
How much does it cost to start an LLC in Colorado?
You’ll need to pay the Secretary of State a one-time filing fee of $50. The fee is submitted together with your Colorado LLC’s Articles of Organization.
Only the following debit or credit cards are accepted:
- American Express
How do I file a Periodic Report for my Colorado LLC?
You can file your Periodic Report online here:
The filing fee is $10.
The Periodic Report can be submitted during a 5-month window:
- 2 months before the Periodic Report Month (the month your LLC is formed)
- During the Periodic Report Month itself
- Within 2 months after the Periodic Report Month
You can still file your Periodic Report within 2 months after the lapse of the 5-month window. However, you will be charged an extra $50 for late submission. Your LLC will also be marked “Non-compliant”.
Tip: You can find your Periodic Report Month by looking at your Articles of Organization’s approval date. If you need help filing your Periodic Report correctly, please see our free guide.
Is Colorado the best state to form my LLC?
Yes, but only if Colorado happens to be your home state. Otherwise, you’d just be doubling your expenses if you form your LLC in a state other than your home state.
A lot of people are misled into forming an LLC out of state, in such places as Wyoming, Nevada, and Delaware.
This is bad advice because if you formed an LLC out of state, you’d then be required to register that out-of-state LLC as a “Foreign LLC” in Colorado.
This means you’ll have to pay:
- 2 State filing fees
- 2 Annual Report fees
- 2 Registered Agents
- 2 State Taxes
Again, forming an LLC in Colorado is good if you happen to live there. For those who don’t live there, we recommend you form your LLC in your own state. This way, you’ll avoid the headache of having to pay for and manage 2 LLCs. For more information on which state is best, please read What’s the Best State to Form Your LLC in.
Should I form a Colorado LLC for real estate investing?
Forming an LLC is a very popular choice for real estate investors. A Colorado LLC builds a “wall of protection” between your personal assets and your real estate investments.
In case your real estate LLC gets sued, only its assets can be used to pay off its debt or liabilities. Your personal assets (like your home, cars, bank accounts, etc) remain safe.
What are the annual fees for a Colorado LLC?
The annual fee for a Colorado LLC is $10. You will pay this each year by filing what’s called a Periodic Report. Here is the link to file the Periodic Report:
What other fees do I need to pay to form an LLC in Colorado?
Besides Colorado’s one-time filing fee of $50 and the $10 per year for your Periodic Report, there are no other fees. Colorado is a very affordable state!
However, consulting with a lawyer and/or accountant will cost extra.
And if you need to hire a Commercial Registered Agent for your LLC, that will cost an additional $100-$300 per year.
What taxes do I need to pay as an LLC in Colorado?
Taxes are paid on 3 levels: Federal, State and Local.
Your LLC does not file its own tax return with the IRS. Instead, profits and losses “flow through” to your personal tax return (Form 1040). The LLC’s profits or losses are listed on a Schedule C inside of your personal 1040 tax return.
Your LLC will also need to file and pay taxes at the state level with Colorado. A Colorado LLC pays its taxes at the Personal Net Income Rate of 4.6% (not at the Corporate Net Income Rate).
You will need to file the Colorado Individual Income Tax Form 104 with the state by April 15th each year. Here is a link to instructions as well as forms:
You will also likely need to pay taxes at the local/county level. However, you’ll need to speak with a professional in your area since Colorado has 64 counties. This article is just an overview.
Also, calculating your tax obligations can be complicated. It can negatively impact your LLC if done incorrectly.
For this reason, we recommend getting a qualified CPA/accountant to help you. Check out LLC Taxes for tips on finding a good tax professional.
Here are some more tax resources:
- Colorado Department of Revenue
- Get Ahead Colorado (free tax preparation for certain families)
- Tax Help Colorado (free tax preparation for certain persons)
What’s better: a Colorado LLC or a Corporation?
A Colorado LLC is usually a better choice for most people since it offers you personal liability protection – (just like a Corporation) – without having the complexity of management and without double taxation.
Personal liability protection means your personal assets won’t be used to pay off the debts/liabilities if your LLC gets sued.
And avoiding double taxation means your LLC’s profits/losses will “flow through” directly to your personal income tax return (rather than paying taxes at the corporate and personal level).
A Colorado LLC is also simpler to run and manage as you’re not required to hold annual board meetings or record meeting notes.
What’s better: a Colorado LLC or a Partnership?
A Colorado LLC is definitely better than a Partnership.
In a Partnership, you and your partner(s) are personally liable for your company’s debts.
Forming an LLC in Colorado offers personal liability protection to you and all the members of the LLC. That means your personal assets are going to be protected if your business gets sued.
What’s better: a Colorado LLC or a Sole Proprietorship?
A Colorado LLC is definitely better than a Sole Proprietorship for the same reason as above.
You will be held personally responsible for your business’s debts and liabilities.
With a Sole Proprietorship, there is no distinction between you personally and your business. Essentially, you ARE your business.
Many Sole Proprietors usually don’t know how simple it is to form an LLC (or they were given poor advice).
When is the best time of year to form an LLC in CO?
Generally, any time of the year is the best time to form a Colorado LLC.
For tax purposes however, we recommend you avoid forming your Colorado LLC in October, November, and December (if you don’t need your business open those months and can wait until January).
It’s not a huge deal, but rather a helpful tip.
For example, if you form your LLC in November, it will then be in existence for 2 months during the tax year. This means you’ll need to file a tax return for that year. So, if you don’t actually need the business open before January, waiting until January will save you the annoyance of filing a tax return for that year.
However, if you can’t wait until January, then it’s more important to form your LLC and disregard the small annoyance.
Where can I get an Operating Agreement for my CO LLC?
We’ve provided free Operating Agreement templates you can download and fill in the blanks:
You can also read our free step-by-step guide on completing your LLC Operating Agreement.
Who can be my Registered Agent in Colorado?
If you have a street address in Colorado, your options are:
- You can be your LLC’s Registered Agent
- Your LLC can serve as its own Registered Agent (this is a unique law in Colorado)
If you don’t have a street address in Colorado:
- A friend or family member can be your LLC’s Registered Agent
- Hire a Commercial Registered Agent
If you want to hire a Commercial Registered Agent, we recommend Northwest Registered Agent ($125 per year).
Northwest Registered Agent has been in the business for 20 years. They offer excellent services at affordable rates.
Why form an LLC in Colorado?
You should form a Colorado LLC to protect your personal assets.
A Colorado LLC offers you personal liability protection if your business gets sued. Your personal assets cannot be used to pay off your business’s debts or liabilities.
Where can I learn more about LLCs?
Please check out our Learning Center for more videos and helpful articles on:
- What an LLC is
- What its advantages are
- What the best state is to form one
Ready to Form your Colorado LLC?
Visit LLC University’s free step-by-step guides on how to form your LLC in Colorado.