How Much Does an LLC Cost in Colorado (Updated Pricing)
If you're considering forming a limited liability company (LLC) in Colorado, you'll want to be familiar with the business formation expenses.
Through my experience as a Mergers and Acquisitions specialist and after consulting business experts in the state, we'll share our insights on the costs and essential requirements needed to establish a Colorado LLC.
If you're in the process of setting up an LLC, hiring an experienced LLC service in Colorado could be a wise choice to avert mistakes that may delay your LLC's inception.
Quick Summary
- An LLC in Colorado costs \$1 to file the Articles of Organization and \$16 to obtain a license tax.
- Upon approval of the business, additional expenses you may incur include licenses and permits, taxes, periodic reports, a registered agent service, and other documents.
- According to the Colorado Department of Revenue, members of a multi-member LLC must pay a 4.63% state business tax on their share of the net income.
- I was surprised to find out that the state only charges \$1 for filing the Articles of Organization, thanks to the Colorado Business Relief Act.
Cost to Start an LLC in Colorado
When establishing an LLC in the state, you should be aware of the mandatory fees and optional expenses associated with forming a business entity.
1. LLC Formation Filing Fee (\$17 - Mandatory)
An LLC in Colorado costs \$17 for essential filing. This fee covers the Articles of Organization fee (\$1) and license tax (\$16).
As per the Colorado Business Fee Relief Act, the \$1 charge only applies once when you first create your Colorado LLC, and no monthly (or yearly) expenses are required [1].
The processing time for mail applications is 7-10 business days. A 3-day expedited service is available for paper submissions only for a \$150 fee.
However, I prefer filing online since the application is approved in real time.
"In Colorado, LLCs are the preferred business structure due to their liability protection for owners, making them the most popular entity choice."
- Jon Morgan, CEO, Co-Founder & Editor-in-Chief of Venture Smarter
2. Registered Agent Service Fee (\$80-\$300 Annually - Optional)
When establishing your LLC, you must select a registered agent in accordance with Colorado law. If you act as your LLC's registered agent or hire a friend to do so, there is no extra expense (\$0).
You can, however, choose to work with professional registered agent services in Colorado.
You'll pay roughly \$80-\$300 a year for this. In the majority of instances, it’s better to hire a registered agent firm to safeguard your privacy and provide other helpful business ownership and operating procedures.
3. Name Reservation (\$25 - Optional)
You can reserve a company name for \$25 if you aren't ready to form your Colorado LLC just yet but know what you intend to call it.
You can hold the name for 120 days by submitting a Declaration of Reservation of a Name to the Colorado Secretary of State.
Before filing the application, I remind clients to confirm that the company name is available in Colorado and that it complies with state guidelines.
Related article: How to Change an LLC name in Colorado
Expenses Following the Approval of Your LLC
Here's a rundown of all other Colorado LLC fees you may incur when starting an LLC in Colorado.
1. Local Business License (Depending on the Line of Business - Mandatory)
Counties and towns in Colorado are required to obtain a business license.
The cost varies depending on the area and the sector of the business. My clients recently informed me that most company licenses in Colorado Springs and Boulder cost \$110 and \$25, respectively.
With any state-issued professional licenses, LLCs in regulated sectors like liquor sales, engineering, contracting, and other specialized businesses also need to obtain a permit on the municipal level.
2. Sales Tax Licence (\$16 - Mandatory for Retailers)
Businesses engaged in retail sales are allowed to operate in Colorado and collect sales taxes [2]. According to the Colorado Department of Revenue, this applies to all retail transactions, with the state imposing a standard sales tax rate that varies by locality, averaging between 2.9% to 11.2% across different regions.
Almost all LLCs that want to conduct taxable business must have this license. The Colorado Sales Tax License has a two-year expiration date and a filing fee of \$16.
To register for a sales tax license, you can either complete an online application for a Colorado sales tax license or submit a Colorado sales tax and withholding account application by mail.
3. Periodic Report (\$10 - Mandatory)
In Colorado, the Periodic Report is the term given to the LLC Yearly Report. You must submit an LLC Periodic Report along with the \$10 processing fee to the state to update your LLC's details.
To avoid penalties and remain compliant with the state, I make it a practice to file 1 month before the due date.
4. State Business Tax (Depending on Income Bracket - Mandatory)
Generally, the net income of an LLC with several members is distributed among them all.
They will be required to pay a fixed rate of 4.63% for the Colorado LLC state business tax based on their fraction of the LLC revenue, according to the Colorado Department of Revenue.
5. Operating Agreement (Optional, but Recommended)
A formal agreement between the LLC Members is known as a Colorado LLC operating agreement. Operating agreements include comprehensive details about LLC ownership and management practices.
LLCs with one member or more should create an operating agreement at \$0, store it alongside their other legal documents, and distribute a copy to each member.
Most websites charge between \$100 and \$200 for LLC operating agreements if you employ a professional.
6. DBA (\$1 - Optional)
You will need a DBA, often known as a "trade name" in Colorado, if you intend to trade under a business name besides your LLC's legal name.
Submit a Statement of Trade Name together with a \$1 filing fee to obtain a trading name in Colorado.
7. Certificate of Existence (\$0 - Optional, but Recommended)
A Certificate of Existence is required to show that your LLC is current with its taxes and state reporting.
With the Colorado Secretary of State's Business Database Search, you may get a free printed copy of the document.
When clients ask the significance of a Certificate of Existence, I inform them that the document is necessary to activate your business bank account, get investment funds, or expand your LLC to other states [3].
8. Certified Copies (\$2 + \$0.25 per additional page - Optional)
When your company expands, you might need to get a certified copy of your corporate records from the Secretary of State. A certified copy costs \$2 plus 25 cents per page for documents with more than 20 pages.
9. EIN (\$0 - Optional, but Recommended)
The Employer Identification Number is issued by the Internal Revenue Service (IRS) and is necessary for paying taxes, opening business bank accounts, acquiring financial assistance, and hiring employees.
You can apply for an EIN on the IRS website free of charge.
FAQs
What is the Penalty for Paying Colorado State Taxes Late?
The penalty for paying Colorado state taxes late is 5% of the amount due or \$5, whichever is greater.
How Long Will the New Colarodo LLC Rates Last?
The new rates will last until the end of the 2022-2023 financial year or until the general fund is spent, according to a news statement from the Colorado Secretary of State's Office. According to the Colorado Department, this respite will remain through June 30, 2023.
References:
- https://www.sos.state.co.us/pubs/newsRoom/pressReleases/2022/PR20220701BusinessFees.html
- https://casetext.com/regulation/colorado-administrative-code/department-200-department-of-revenue/division-201-taxation-division/rule-1-ccr-201-4-sales-and-use-tax/rule-39-26-103-sales-tax-licensing
- https://www.sos.state.co.us/pubs/business/FAQs/certGoodStanding.html
