A Limited Liability Company, or “LLC,” is one of the most common entity types chosen by business owners when starting a company. LLCs, if set up and managed correctly, can provide LLC owners with valuable limited liability protection while also allowing for broad flexibility in terms of management and structure—traits that are hugely beneficial to business owners.
In order to form a Limited Liability Company in Colorado, the owner(s) of the prospective LLC, or their representative, must file formation papers known as Articles of Organization with the Colorado Secretary of State.
In order to fill out the Articles of Organization, a prospective LLC incorporator must, among other things:
(1) Choose A Name. The name listed on the Articles of Organization is the official, legal name of the LLC. In order for the name to be used, it must be distinguishable from other names currently in use by other entities, and must also contain the term “limited liability company” or a permitted abbreviation of the same. Although the name listed on the Articles of Organization will become the legal name of the LLC, many businesses may ultimately use another name, or “DBA” (“doing business as”) for advertising and marketing purposes. However, DBAs are not listed in a LLC’s Articles of Organization, but are instead obtained by filing a separate registration once the LLC is already formed.
(2) Determine A Principal Office And A Mailing Address. Unlike some other states, Colorado does not require the initial owners, or “members,” of a LLC to be listed in the Articles of Organization. However, it does require that the LLC list both (1) a principal street address and (2) a principal mailing address for the LLC, both of which become publicly listed. As the terms suggest, a principal street address is meant to identify the principal business address of the LLC, while the principal mailing address is meant to identify the principal address for mail to be delivered. The principal business address and principal mailing address may or may not be the same address. Importantly, although the principal mailing address may be a P.O. box, the principal business address must be a street address; a P.O. box cannot be listed. As previously mentioned, because the principal office address, and principal mailing address of a LLC are publicly listed, many business owners, including those operating businesses out of their own homes (such as e-businesses), may be concerned about having their home address publicly listed. In such circumstances, an experienced business attorney may be able to help provide options for using an alternative address.
(3) Choose A Registered Agent (And Obtain Their Consent). Although, as mentioned before, Colorado does not require LLCs to list their initial members in the Articles of Organization, each LLC must identify and list a “registered agent” to act as the LLC’s main point of contact to accept service of process and other official documents on behalf of the LLC. Although a registered agent can be an individual or an entity, a registered agent should be someone in Colorado who can physically accept and sign for official documents during normal business hours of 8am-5pm Monday through Friday. Although some LLCs will list themselves or their members as their registered agents, many companies, and especially those that do not regularly staff an office, will use a third-party registered agent to act as the registered agent of their LLC. In any event, the Articles of Organization must list the name, principal address, and mailing address of the LLC’s initial registered agent, and the registered agent must consent to serving as registered agent before the Articles of Organization can be filed.
(4) Decide If Your LLC Will Be Member-Managed Or Manager-Managed. In general, LLCs are either managed by their owner members (a Member-Managed LLC) or by a manager appointed by the owner members (a Manager-Managed LLC). Although the initial members of the LLC do not have to be listed on the Articles of Organization, the Articles of Organization must attest that there is at least one member (owner) of the LLC and also state whether management of the LLC will be vested in the member(s) or in a manager appointed by the member(s). Choosing whether to set up a member-managed limited liability company or a manager-managed limited liability company depends on numerous factors which an experienced business attorney may be able to help advise on.
(5) Determine Who Will Be The Person Forming The LLC, And Who Will Be The Individual Causing The Articles Of Organization To Be Filed. The Articles of Organization must list the individual or entity forming the LLC. Although this entity or individual may also be a member of the LLC, they do not have to be a member. Accordingly, members who may be concerned about keeping their ownership information from becoming public knowledge may look to use a law firm or other third party to cause the LLC to be formed. Likewise, the Articles of Organization must also list the individual causing the Articles to be filed. Unlike the person forming the LLC, which may be an entity or an individual, the individual causing the Articles to be filed must be an individual. Again, for LLC owners concerned about privacy, using an attorney or other third party to file the Articles may help provide confidentiality.
After determining the above, the Articles of Organization should be filled out, including any other applicable sections, such as regarding a delayed effective date. After completing the form, the Articles of Organization may be filed, and the applicable filing fee may be paid, electronically through the Colorado Secretary of State’s website. Once processed, the LLC is officially formed.
However, forming a LLC is only the first-step in setting up a business. After creating a LLC, owners of a LLC should strongly consider adopting an Operating Agreement to set forth how ownership in the LLC is divided, and to set forth management, voting, and other rights of both current and future members. Additionally, a business-specific bank account should be opened to avoid commingling business and personal funds. An EIN, and various permits and licenses may also need to be obtained. Depending on the nature of the business, numerous contracts should also be prepared or reviewed, including, as applicable, employment and independent contractor agreements, employee handbooks and policies, customer contracts, vendor contracts, commercial leases, insurance agreements, buy-sell agreements, website terms and conditions, investor agreements, and others, and intellectual property should look to be protected by filing registrations for trademarks, copyrights, and patents. Recent federal law also now requires that most LLCs file a beneficial ownership report with the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of Treasury, at, or shortly after, the time of forming the LLC. For LLCs that plan to conduct business in multiple jurisdictions, foreign registration, or creation of subsidiaries or affiliates, may also be necessary. Periodic filings are also commonly required. Given the breadth and importance of the above, consulting with, or obtaining the assistance of, an experienced business attorney as outside counsel may be highly beneficial.
