Many tech company founders in Colorado choose to form a limited liability company (LLC) because they offer many benefits. Most importantly, they provide the LLC owners, called members, with personal liability protection.
An LLC is also a pass-through entity, meaning that profits and losses pass through to the members and are taxes at their personal tax rates. In addition, there are several tax deductions for LLCs, which can help members maximize their tax savings." The LLC is not taxed.
Forming a Tech LLC in Colorado involves several steps, which we’ll cover here.
The first step is to name your tech LLC, if you haven’t already. Be sure to choose a name that’s unique and easy to remember and spell.
You’ll also need to make sure that your LLC name complies with Colorado’s business name regulations, which are as follows:
Once you have a name in mind that follows the rules, you’ll need to make sure it’s available by going to the Colorado Secretary of State’s website and doing a name search.
You should also check the USPTO website to make sure the name is not trademarked.
An LLC in Colorado is required to have a registered agent, which is a person or company with the authority to accept official correspondence on behalf of your LLC.
You can appoint yourself as the registered agent, but that can be restrictive because you’ll be required to be present at your registered address during business hours. Instead, many entrepreneurs choose to appoint a registered agent service that will accept your correspondence, send you a notification, and make the correspondence available to you online.
In Colorado, you must specify your management structure on your LLC formation documents. You can choose between two different types of LLC management structures.
Now you’re ready to officially form your Colorado LLC by going to the Colorado Secretary of State’s website. You’ll need to enter your LLC name and address, your registered agent name and address, and your management structure.
The fee to file is $50 and your LLC should be approved immediately.
An operating agreement is not legally required in Colorado, but it’s prudent to have one in place. An operating agreement will define the ownership of the LLC, the management structure, roles and responsibilities of managers, the voting rights of members, and how disputes are resolved.
Without an operating agreement, you have no official document that specifies the ownership percentages of your business, so it’s not a step in the process that you should skip.
You can have an attorney draft your operating agreement, or you can find templates online that you can customize for your business.
Depending on your specific location and tech products or services, you may need various business licenses and permits at the state and local levels. Be sure to research the requirements to ensure that your business is in compliance with all laws.
If your LLC will have employees, or if it will have more than one member, you’re required to obtain an employer identification number (EIN) from the IRS. An EIN identifies your business for tax purposes. You can apply online on the IRS website at no cost.
You’ll need to obtain several types of business insurance that may include:
Have a conversation with your insurance agent to get their recommendations on the types of insurance that your specific business should have.
It’s important to keep your business and personal finances separate when you have an LLC. That’s because the personal liability protection of an LLC comes from the fact that you and the LLC are considered separate entities, meaning that the LLC has its own obligations. If you commingle your business and personal funds, it blurs the line between you and the LLC as separate entities, which could threaten your personal liability protection.
Most banks offer business bank accounts, as do online banks. You’ll probably need to provide a copy of your LLC formation documents, your operating agreement, a banking resolution, and your EIN to open an account.
A banking resolution is a document that specifies who is authorized to handle banking matters on behalf of the LLC.
Forming a tech LLC in Colorado is a process, but you need to make sure that you follow all the steps to keep your business in compliance and protect your interests and the interests of your tech company. If the process seems overwhelming, you can enlist the help of an attorney or use one of the many LLC formation services companies that you can find online. They offer products and services that can assist you with many of the tasks you need to complete.