What is a
Colorado Limited Liability Company (LLC)?
A Colorado Limited Liability Company, commonly referred to as a LLC, is a
legal entity that is formed at the state level to separate a
business owner from his or her business. Like a corporation, the
owners of a LLC are not personally liable for the debts of a
properly formed and maintained LLC. Like a partnership or sole
proprietorship, an LLC has operating flexibility and is a
pass-through entity for tax purposes. This means that the profits of
the LLC are passed through and taxable to the owners of the LLC
unless the LLC elects to be taxed as a corporation.
How long will it take to form my LLC?
The processing time for forming an
LLC in Colorado depends on the turnaround times of the service you
use to prepare your LLC documents plus the processing times of the
State of Colorado. The standard packages for most formation
companies require 3 - 5 weeks but Colorado Business Formation
processes and submits all filings as an expedited filing which means
your LLC is formed in 2 Business Days .
What is a Registered Agent?
A registered agent is a person appointed by an LLC to accept
services of process and any other important documents on behalf of
the LLC. Colorado requires that a registered agent
be located in Colorado and it must have a permanent legal street address
where legal papers can be personally delivered during business hours.
PO Boxes and mailbox services are not valid. If you are a
manager or member of your LLC and you have a Colorado
address, you can serve as your LLC’s registered agent. Otherwise,
you can purchase our Registered Agent service. Also, the registered
agent’s name and address is a matter of public record. Some
business owners prefer to keep their information private and if so,
you can purchase the Registered Agent services we offer.
How many people are needed to form an LLC?
In Colorado, an LLC must have at least one
member but can have as many members as desired (there is no limit in
# of members).
An owner of an LLC is commonly known as a member of that LLC (similar to shareholders of a
How is Ownership
established with an LLC?
Ownership in an LLC is usually structured in two ways: (1) by
percentage or (2) by membership units, which are similar to shares
of stock in a corporation. In either case, ownership generally confers the
right to vote and the right to share in the profits of the LLC.
Ownership is generally established and evidence with ownership
provisions in the LLC Operating Agreement.
A limited liability company can also be organized with different
classes of ownership interests, which provides flexibility for
special allocations of profits and voting power. If you are thinking
about having a complex structure like this, it is advisable that you
consult an attorney and accountant.
What is an Operating Agreement?
An Operating Agreement is the primary contract among the members
of a LLC that governs the membership, management, operation and
distribution of any income of the company. It is similar to a
corporation’s Bylaws. An Operating Agreement should be in place
directly after the LLC becomes active. While an operating agreement
is not required to form a Colorado LLC and it not a strict legal
requirement in Colordado, most every LLC has one and it is strongly
recommended that every Colorado LLC adopt one to provide further
support for limited liability protection.
How is an LLC taxed on its income?
By default, LLCs do not pay income tax at the entity level.
Instead, the LLC's income is passed through to the members, who must
recognize their allocated income or loss on their personal tax
returns. For a single-member LLC, this income is reported on the
individual owner's Form 1040, Schedule C. For multiple member
LLCs, an informational return is filed with the IRS and members are
given K-1s. However, an LLC Can elect
to be taxed as a corporation.
How is an LLC managed?
An LLC can be either “member managed” or “manager managed.” The
initial members (owners) can decide whether they, as members, want
to each be responsible for managing the LLC or whether they want to
set up a Board of Managers (manager managed) and elect persons to be
managers similar to the way a corporation is managed by its Board of
How much will it cost to form and run an LLC?
Colorado charges an initial filing fee of
$50 to form an LLC. If you choose to hire a service like
Colorado Business Formation or an attorney, there will be a service
fee as well. Colorado Business Formation sells its basic
package for $139 service fee. Attorneys typically charge between
$1000 to $5000 for new business formations.