The TRUE Cost to Start a Colorado LLC

Last updated on: July 27, 2021

The process of launching an LLC in Colorado involves some costs that are worth considering when budgeting. To avoid any surprises when starting an LLC, let’s take a look at Colorado startup fees, including required state fees and possible additional expenses.

Bare Minimum Cost to Start an LLC in Colorado

  • LLC Name Reservation Fee: if you are not ready to register an LLC, but want to keep your chosen name, use the reservation service. It costs $25;
  • LLC Formation Service: you can hire an LLC service that provides business formation services. They are usually quite affordable. For example, LegalZoom can create your LLC for $99, and ZenBusiness can do it for only $39;
  • Articles of Organization Fee: in Colorado, the processing fee is $50. This cost is mandatory because only after the Articles of Organization are approved, the company is considered to be officially established.

Overall Colorado LLC Formation Costs

LLC Name Reservation Fee

Do you have the perfect name for your future company, but you’re not ready to officially start the Colorado LLC formation process? Applying for a name reservation allows you to handle the preparation without worrying that someone will use your chosen name.

Although reserving a business name is optional, it is a good way to protect a name you like. For a reasonable additional $25 payment, the state will hold it for you for 120 days.

On the other hand, if you are ready to start an LLC right away, you can skip this step. The Secretary of State’s approval will register the company name automatically.

Business Domain Name & Website

When creating an LLC in Colorado, it is important to have a digital presence. 

You can brand your business and attract more customers by purchasing a domain name that corresponds to the name of your LLC. For $4.99, GoDaddy lets you quickly find the best option available. 

Articles of Organization Fee

To start your Colorado LLC and be recognized by the state, you must file the Articles of Organization with the Secretary of State. You can do this by filing online, paying a one-time fee of $50 by card.

Generally, to file the Articles of Organization, you will need to provide the following information:

  • LLC name;
  • Information about the members of the LLC;
  • Name and address of the registered agent;
  • LLC’s principal office address;
  • Effective date;
  • Name and signature of the applicant.

If you don’t want to handle filing the Articles of Organization and opening an LLC on your own, then consider hiring a professional service. There are many LLC formation services available online that will quickly and efficiently incorporate a company on your behalf.

Business Licenses

After registering a business with the Colorado Secretary of State, you will probably need to spend between $50 and $100 to obtain a business license to start operating. However, the number of licenses for your LLC and their prices will depend on the scope and location of your business. 

Business licenses for Colorado LLCs can be:

  • Federal: visit the Small Business Administration website for more information;
  • State: to operate in compliance with state law, check the Secretary of State website to learn more about licensing;
  • Local: the county and municipality may provide additional business licenses for businesses operating in their area. To find out about local requirements, contact the Chamber of Commerce.

Additionally, depending on the nature of the company, to legally operate in Colorado, you may need the following types of licenses and permits:

  • Professional license;
  • Zoning permits;
  • Alarm permits;
  • Building permits, etc.

You can learn more about what licenses your LLC will need on the Colorado Department of Regulatory Agencies website.

If you want to save time, entrust your license research to a professional service. They do the legwork, including the processing of the right forms, at a reasonable price. For example, IncFile provides such services for $99.

LLC Service

The process of starting an LLC requires time and a number of formal requirements. However, you do not have to do it on your own. You can hire an LLC formation service that will take care of all the paperwork regarding the registration process.

Besides the basic LLC formation service, online companies provide useful additional services, such as:

  • Drafting an Operating Agreement: this document facilitates running a business as it outlines the basic principles and procedures of the LLC;
  • Employer Identification Numbers: although you can get it yourself, EIN Registration services that cost about $60-$70 will allow you to focus on managing your business;
  • Registered agents service: the average cost of a registered agent service ranges from $0-$125 per year, which is quite affordable.

From a variety of LLC formation services, the best options are:

  1. ZenBusiness: for $39 they will form your business and provide one year of registered agent services for free;
  2. LegalZoom: their prices start at $79, which is slightly higher than some of their competitors. However, it is a good choice if you prefer companies with a lot of experience and an impressive reputation;
  3. IncFile: the cost of their basic LLC formation package is $0. You will only pay the $50 mandatory Articles of Organization filing fee. Moreover, all packages include one year of a registered agent service for free.

Registered Agent Service

To be compliant with Colorado business law, every company must have a registered agent. It is required not only during the LLC formation process but throughout the life of the business. 

As a rule, appointing a registered agent costs $0-$125 per year. Their main functions are as follows:

  • Receiving official correspondence, including tax documents and legal notices. This ensures that you are always aware of potential legal disputes and your LLC status;
  • Assistance in complying with current state requirements.

The duties of a registered agent can be performed by an individual or a legal entity. Nevertheless, it is better to entrust the responsibility to a professional online company. Compared to other options, the registered agent service guarantees high-quality service and accurate documentation.

In addition, for $39-$79 some online companies are not only ready to handle LLC formation, but also provide a free registered agent for one year.

If you haven’t decided which service to choose yet, consider hiring Northwest Registered Agent. Their LLC registration package for $225 includes one year of free registered agent services. After that period, the price will be $125 per year, which is slightly higher than the market price, but their registered agent is recognized as the best in the industry.

Attorney Fees

If you need professional filing assistance or you have any doubts regarding the LLC formation process, consult an attorney or an experienced accountant. Of course, it costs some money, but a professional will help you to choose the best business structure, give essential business advice and answer all your questions.

Attorney’s services are expensive. Some of them charge $150- $350 per hour, while others have a flat rate for a comprehensive setting up of an LLC, which varies from $500 to $2,000 depending on their experience and qualifications. Sometimes there is also a one-time free consultation that lasts 30-60 minutes.

If you haven’t chosen the right professional yet, use the Colorado business attorneys website or try Avvo to compare available options according to price, location, etc.

Foreign Qualification Fee

If you own a foreign business entity that is expanding into Colorado, then you need to legalize your business in that state. 

To obtain foreign qualification in Colorado, you must register with the CO SOS by filing the Statement of Foreign Entity Authority. A $100 filing fee applies, which is a little higher than the Articles of Organization fee, but it is a one-time payment.

If foreign LLCs try to do business in Colorado without foreign qualification, the state has the right to impose penalties.

LLC Annual Fees

To ensure that The Colorado Secretary of State always has up-to-date business records about your company, you must file Periodic Reports on time. It contains some basic information, including:

  • LLC’s official business name;
  • Names and addresses of the participants;
  • Registered agent’s information;
  • Colorado business entity ID number, etc.

There is an annual reporting deadline. You can find it on your LLC page by doing a Business Database Search.

Periodic Reports cost only $10 per filing, but Colorado charges a $50 penalty if you miss the deadline, so you must file on time.

Taxes

Since LLCs are “pass-through” entities by default, the requirement to pay federal and state income taxes does not apply to them. Instead, the company’s income and expenses are reported on the owners’ individual returns.

Nevertheless, members may indicate that the LLC is taxed as a corporation, having agreed on that with the IRS in advance. In this case, the company will pay the corporate income tax of 4.63% and file its own tax return.

Also, there are business-related taxes in Colorado, which depend not on the type of business entities, but on the specifics of the LLC. For example, sales tax. If your LLC operating in the state sells goods or services, you must pay this tax.

Colorado does not require you to pay special minimum annual LLC taxes, also known as the franchise tax. This distinguishes it from some other states. For example, LLCs in California are responsible for paying the highest minimum annual tax, which can be as high as $800. Meanwhile, the minimum tax is $100.

What if I Don’t Pay?

If a company fails to meet state requirements, it becomes “noncompliant” or “delinquent” and is subject to penalties. Usually, the reason for this is missing a periodic reporting month or violations related to the registered agent.

First, there are such consequences for failing to submit a regular periodic report as:

  • A $50 penalty;
  • You cannot obtain a “Certificate of Good Standing,” which makes the LLC unable to foreign qualify in another state;
  • A blanket ban on renewing business licenses and professional licenses;
  • You can’t apply for business loans.

If your company continues to conduct business in the state and does not correct violations within 60 days, the consequences will be more serious. Such a business risks administrative dissolution by the state for not complying with the law.

Planning Your Expenses

The Colorado LLC formation process may seem expensive, but don’t worry. One-time fees make up the bulk of the costs, so you won’t have to go back to them in the future. 

The exceptions are Annual Reports and registered agent fees. Keep this in mind when you incorporate an LLC in Colorado to avoid surprise costs and maintain a good reputation.

Key Steps for Starting a Colorado LLC

Whether you do everything yourself or hire an online company to handle the process on your behalf, the startup process involves the following steps:

  • Come up with a good name for your business, making sure it meets all state requirements. Remember to verify its availability by searching the business database. If it is already claimed by another business, the application will be rejected;
  • Choose your registered agent, who is required to operate a compliant business entity in the state;
  • To officially open for business, apply for Articles of Organization. You will need to fill out the paperwork, pay the $50 fee, and file it with the state of Colorado for approval;
  • Create an operating agreement for your LLC, writing down the basic procedures and management structure;
  • Submit documents to obtain all licenses and permits required for your company;
  • Get a federal tax ID number, needed to pay taxes and hire employees;
  • Register with the Colorado Department of Revenue’s Taxation Division to pay your taxes.
Senior Business Tax Writer, etc
Jean Wilson Murray
https://bestllcservices.co/
(323) 789-5289
Senior Business Tax Writer, etc
Jean Wilson Murray

In this IncFile vs ZenBusiness review, we're going to compare two of the most popular LLC formation services based on pricing, features, and drawing out differences and similarities to let you see which is most suitable for you and your business.

You can learn more about @Mike here.

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