If you’re not sure how much to budget to start a limited liability company (LLC) in Colorado, you’ve come to the right place.
This article will explain in detail how much it costs to form a Colorado LLC.
Read on to learn about:
- The cost of forming a Colorado LLC
- Additional expenses that can help your business succeed
- The pros and cons of different LLC formation strategies
By the time you reach the end of this article, you will know how much it will cost to start a Colorado LLC.
Total Colorado LLC Cost – Starting at $50
According to the Colorado Secretary of State’s Fee Schedule, the minimum cost to form a Colorado LLC is $50.
This includes only one item:
- Articles of Organization filing fee: $50
However, you may also need to get business licenses or permits to operate your business in certain industries and locations.
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Colorado LLCs – the Basic Costs
Though the cost of starting a Colorado LLC will vary based on several factors, the minimum expense is $50. We’ve discussed some other potential mandatory costs below.
Articles of Organization Filing Fee — $50
Articles of Organization are a type of legal document that is used to officially create LLCs. In Colorado, you need to submit them to the Secretary of State. While this might sound complex, there is no need to worry. It simply requires you to list details about your business.
The filing fee is $50, and you must submit your application online.
Licenses and Permits — Various
Colorado does not require companies to obtain a state-level general business license. However, LLC owners must get a license from state agencies to engage in certain activities and professions. The fees will vary depending on which license you need. You can contact the Colorado Small Business Development Center at 720-665-7439 to learn more.
Some city and county governments also require business licenses or permits, the costs of which will vary. For instance, the city of Denver requires certain companies to obtain local business licenses to operate there.
Colorado LLCs – Optional Costs to Consider
On top of the mandatory costs described above, you may also want to spend some extra funds on optional expenses. Although not required, these purchases can significantly benefit your LLC.
Expedited LLC Filing Fees — N/A
Colorado does not have expedited filing for LLC filings. This is because when you file your Colorado LLC articles of organization, they will be immediately processed and approved.
Registered Agent Fee — about $100 per year
Under Colorado law, all LLCs must keep a registered agent to receive legal documents on behalf of the business.
You will include your registered agent info in your Colorado articles of organization for no added cost. However, if you ever need to change your agent, there is a $10 fee.
Some new LLC owners think that the best choice is to name themselves as their LLC’s Colorado registered agent. But many don’t know that to do so, they must always be available to accept documents during regular business hours. They also will have their address posted publicly online.
You can avoid these issues by using a registered agent service instead. They only cost about $100 each year, and the business will take care of all of your LLC’s registered agent needs.
Check out our Best Registered Agent Services article for some of our recommendations.
Operating Agreement — Variable
Operating agreements are legal contracts that set the rules for LLCs. They outline important details such as the methods for entering and exiting the business and what the members’ rights and duties are. Even though Colorado law does not mandate that LLCs have operating agreements, we strongly suggest that you make one.
While you can write your own LLC operating agreement, we generally don’t suggest that you do. If you don’t have a legal background or prior experience with LLCs, your operating agreement might not cover all the bases.
You can elect to retain a lawyer to write your LLC operating agreement. And though this option isn’t cheap, you will receive an expert contract that sets your business up for success. However, if you want to save some money, an LLC formation service can make you an adequate operating agreement for as little as $39.
DBA Fee — $20
There are several reasons you might want to run your business using a different moniker than its official business name. For instance, you may want to drop the “LLC” from your signs and business cards. Or maybe you want to update your name to reflect changes to your business.
No matter the reason, if you want to use a different business name for your LLC, you must register a “doing business as” or “DBA” name. Colorado calls DBAs “trade names.”
Name Reservation Fee — $25
If you know the name you want for your LLC but aren’t quite ready to file the paperwork, Colorado lets you reserve an LLC name for 120 days. This will stop others from taking the name during this time.
Domain Name — about $20 per year
It’s undeniable that a business needs to have a website to compete in the modern marketplace. But before you can make a website, you need to purchase a domain name. Fortunately, in these times, domains are a completely affordable investment.
Make sure that you get your domain as soon as you register your LLC. If someone else buys it first, you will be out of luck. If you wait too long, you can fall prey to “domain squatters” who track new LLCs and buy their domains to resell them for a profit.
You can purchase a domain via GoDaddy.com or a similar website for about $20 to $50 per year. On top of that, you can often take advantage of sales to get a domain for even less.
Getting an Employer Identification Number (“EIN”) — Free
An EIN is a 9-digit ID number that the Internal Revenue Service assigns to businesses. It’s like a social security number for companies instead of people. The IRS requires some LLCs to obtain an EIN, while others do not have to.
But even if your LLC does not have to get an EIN, we strongly suggest that you apply for one anyway. For starters, most banks require EINs to open business bank accounts. Plus, using an EIN can help protect your identity from theft.
Foreign LLC Qualification Fees — about $100 per extra state
Expanding into a new state is a great triumph for any business. Still, you should know that you will need to spend some extra cash if you plan to do so. You don’t have to form a new LLC, but you will need to register as a foreign limited liability company in each state where you want to do business.
Foreign LLC filing fees vary among states. As a rule of thumb, you should plan to spend $100 or more per state.
Writing Formation Costs Off
The money you invest in forming an LLC in Colorado can typically be deducted from your income taxes as business startup expenses. The IRS has provided significant guidance on this issue, so check out the IRS website to learn more about deducting expenses.
LLCs are usually considered “pass-through” legal entities for tax purposes. This means that LLC owners can usually deduct up to $5,000 in startup costs in the year they start their business.
Evelyn, who is already a licensed body artist, decides to form a single-member LLC and open her own tattoo parlor in Denver, Colorado. Her formation costs are as follows:
- Colorado LLC Articles of Organization: $50
- Denver Body Art Establishment License Application Fee: $200
- Denver Body Art Establishment License Fee: $200
- Operating Agreement: $65
- Registered Agent Fees: $95
- Name Reservation Fee: $25
- DBA Fee: $20
- Web Domain Costs: $25
Since LLCs are pass-through entities, the business itself won’t be subject to income taxes. Instead, Evelyn will report the money she makes from her LLC and any business deductions as personal income on her state and federal taxes.
Evelyn’s total formation expenses were $680. Before deducting these costs, her total taxable income was $62,000. But by deducting her expenses, she lowers her taxable income to $61,320. This will reduce her 2023 federal income taxes from $9,389 to $9,239.
While this is not a drastic amount of savings, LLC owners who regularly deduct their business expenses can see substantial tax savings over time.
Cheapest Way to Start an LLC in Colorado
If you are forming a Colorado LLC, choosing the best formation strategy based on your particular needs is crucial. Let’s explore a few of the options below.
Formation Service – $39 + state fees
An LLC formation service will handle the entire LLC creation process. Although they are not lawyers, they know what is required to start an LLC in Colorado and can take care of it for you.
LLC formation services are a great choice for many new business owners. Some of their benefits include:
- They’re easy. In most cases, a formation service will have helped hundreds of people through the exact process you are struggling with now. They have all the documents, information, and expertise you need right on hand.
- They don’t cost much. Because formation services have such a large volume of business, they don’t have to charge their clients that much money.
- They’re reliable. All of the formation services’ products and procedures have been tested hundreds of times over in the real world. That kind of experience should give you peace of mind and confidence going forward.
- They’re fast. Formation services have seen almost every business formation situation already. Chances are, they have many solutions for you that are ready right now before you even know you need them.
However, although formation services are sufficient for many LLCs, they are not the right fit for everyone. Some drawbacks of this approach are:
- They’re not the best solution for complex LLCs. If you are forming a complicated company or one in a heavily regulated industry, you will have concerns that probably need more focused expertise in that area of business.
- Even if a formation service is a good fit, you can expect upselling. Formation services have to make money too, and some of them may pressure you to buy formation products or business services you don’t need. Even when you are using a formation service, you need to be a smart and informed consumer.
Using a professional LLC formation service can be a great way to set up a business. Check out our Best LLC formation services article for some of our suggestions.
If you choose to hire a lawyer to start your LLC, you will be working with an experienced professional who has expertise in Colorado LLC laws. Just keep in mind that law firms can be pricey. Attorneys frequently charge an hourly rate for their services, which may be several hundred dollars an hour.
Despite the cost, using a lawyer certainly comes with advantages:
- Lawyers help you manage risk. If you are starting a business with complicated legal issues, hiring a lawyer would be the best choice.
- Lawyers offer more customization when you need it. Do you need specific things put in an operating agreement? Is your company going to have a unique ownership structure? You may need an attorney to make sure these issues are handled properly.
Yet, for the average LLC, the disadvantages of an attorney often overshadow the positives:
- Lawyers cost more than any other option. The price tag alone should convince you that if you don’t need a lawyer, it’s not worth hiring one.
- Finding a lawyer takes a long time. Getting a lawyer who specializes in what you need, costs what you’re willing to pay, and can work with you well is a tall order.
- Lawyers also take longer to form a business than a formation service. Because lawyers are also very careful people, they will generally take much longer to form your company than non-lawyers would. Fortunately, most people don’t need a lawyer. In 90% of cases, a formation service will do just fine.
Do it Yourself
Another option is to start your LLC yourself. If you choose to go this route, just remember that your time is valuable. If you’re devoting hours to filling out LLC formation paperwork, you can’t spend that time on growing your business.
Still, there are obvious benefits to a DIY approach:
- Personal knowledge. A DIY business owner will learn a lot about the process while forming their own business, and they probably will retain that knowledge for years to come.
- It costs less upfront. If you don’t account for the value of your time, a DIY solution is the cheapest option.
But make sure you also consider the weaknesses:
- You’re losing money when you consider how much time it takes to DIY. If you figure out that your time is worth $30 per hour, and you take 20 hours to complete your business formation, you have essentially spent $600 on business formation.
- There’s the risk of making a mistake. DIY business owners can easily make a mistake with all the paperwork that can cost them even more time and money.
- It’s a headache. State workers are very helpful, capable people. But they will also tell you that the laws and rules governing business formation are not easy, and they follow those rules for a living. It’s going to be even harder for you.
Annual Colorado LLC Fees: How Much Will it Cost to Maintain your LLC?
Colorado law requires LLCs to file an annual report, known as a “periodic report,” with the Secretary of State. You must file online using the Record Identification Search tool. There is a $10 filing fee.
Some of your optional expenses will also be due on an annual basis. For instance, you can expect to pay the following:
- Registered agent service fee: approximately $100
- Domain name registration: $20 to $60
How Much are LLC Taxes in Colorado
Because LLCs are typically pass-through tax entities, an LLC owner will pay state income taxes on their share of the profits, while the business itself will not be taxed. Colorado has a flat income tax rate of 4.55%.
Additionally, if your LLC will sell physical goods, you’ll need to remit sales tax to the Colorado Department of Revenue. You can register your LLC as a new business using the online Colorado Sales and Use Tax System.
Colorado LLC Formation Costs Quick Links
- Colorado Online Filing System
- Colorado Fee Schedule
- Colorado Sales and Use Tax System
- Colorado Secretary of State
- Colorado Department of Revenue
- IRS — apply for an EIN online
- IRS information regarding the federal tax treatment of LLCs
Colorado LLC Formation Costs FAQs
How much does it cost to start an LLC in Colorado?
The minimum cost is $50. But depending on the type of business you are starting, and where you will operate, it may cost you more.
What is the cheapest way to start an LLC in Colorado?
A do-it-yourself strategy is the cheapest in terms of money spent. But if you factor in the cost of your time, it’s not the lowest-cost option. An affordable LLC formation service is the most cost-efficient choice for most LLCs.
Do I need to hire an attorney to form an LLC in Colorado?
No. Most LLCs can be created without the help of an attorney through an LLC formation service or a DIY approach.
Can I pay to form an LLC more quickly in Colorado?
No. Colorado does not offer expedited service, but online filings are processed immediately.