Entrepreneurship is exciting—the thrill of developing a winning product or service, bringing that idea to life, and making life better for your clients—it’s fun. But unfortunately, it’s not free. Long story short: starting a business has a price tag. LLCs are no exception.
If you’re hoping to start an LLC in Colorado, you’ll quickly learn that you’ll have a pretty long list of fees for forms, licenses, and applications that you’ll need to get started. Some of those are optional fees, and some are unavoidable. In this guide, we’ll walk you through all the costs you can expect when starting a Colorado LLC. By the end, you’ll have a clear picture of how your new business will impact your wallet.
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What’s the least amount I have to pay to form an LLC in Colorado?
If you’re crunching the numbers before diving right in, good on you! Planning ahead is a surefire way to start your business off on the right foot. But let’s make one thing clear: the phrase “cost to start an LLC” is a bit deceptive. That’s because you don’t want to get stuck focusing on the “day one” expenses of business.
That’s right—when budgeting for start-up costs, you need to account for the costs you’ll pay today and the costs you’ll pay a year or two down the road.
So let’s talk start-up costs and ongoing costs for your Colorado LLC. But to keep things simple, here we’ll cover the non-negotiable costs. Later on, we’ll talk about services that are nice to have (but you can live without if you have to).
CO LLC Start-up costs
Colorado has two primary start-up costs. The first one (and arguably the most important one) is the Articles of Organization. Unlike many states, Colorado keeps the fee for this document pretty low; it’s just $50. Regardless, you can’t avoid this cost. After all, the Articles or Organization is the document that officially forms your business within the state. Without it, you’re not a recognized business.
A lot of LLCs will also need to obtain business licenses. There isn’t a single general business license that applies to every entity in the state. Instead, Colorado businesses will need to keep tabs on local general business licenses and professional licenses. For general licenses, you’ll need to get in contact with your local city or county government; they’ll be able to tell you the fees for your area.
If you need a professional license (or suspect you will), check out the Department of Regulatory Agencies. Here, you’ll find links and resources for the regulated professions within the state. Unfortunately, we can’t list out all the fees here; there are too many to list! We’ll just sum up by saying that between general licenses and professional licenses, there’s a very good chance you’ll have to pay one or more application fees.
Ongoing costs for an LLC in CO
If your business lasts (and we’re confident it will), then you’ll have several ongoing costs. These include license renewals, annual reports, and taxes. Let’s dig into those prices and fees.
License renewals
Thankfully, in Colorado, you don’t have to worry about renewing a statewide general business license. But if your city or county requires a general license, you’ll probably have to pay to renew your license. The same applies for any professional licenses you’ve obtained. But just as we can’t list all of the various application fees in one place, we can’t list all the renewal fees, either. This guide would be tedious if we did. When you obtain your licenses, we recommend taking note of the renewal requirements for your industry or area so none of the fees surprise you.
Annual taxes
In Colorado, one of the biggest annual costs you’ll have will be taxes. And income taxes comprise a big part of that. But thankfully, no matter how your business is taxed, you’ll pay the same amount. That’s because the individual income tax (for LLCs taxed as pass-through entities) and the state business tax (for those structured like corporations) is the same: 4.63%. If your business is involved in the sale of a qualifying good or service, you’ll need to collect and pay the state sales tax. Currently, the rate is 2.9%.
There’s also a good chance that you’ll have to pay some industry-specific taxes. For example, businesses involved in fuel transactions, electronic funds transfers, and other areas will be subject to miscellaneous taxes. To learn more, check out the Colorado Department of Revenue.
Annual report
Most states require LLCs to file some version of an “annual report,” or a document that informs the state about the current standing of your business. This document is usually required in addition to annual tax reports, since it usually includes information about your business address, members, your registered agent, and so on.
In Colorado, this report is usually called the periodic report. The due date varies from one LLC to the next (your online business portal can tell you exactly when it’s due). Colorado phased out all of their paper filings, so filing online is your only option. The fee is just $10.
What are the discretionary costs to form a Colorado LLC?
When you’re starting your business, your budget is usually pretty tight. Prioritizing costs can get tricky. The costs we listed above are unavoidable. Well, technically, you can avoid them, but you’ll be heavily penalized if you do. And there’s not much point to spending all that money on starting a business only to knowingly let it be dissolved because you didn’t pay your ongoing costs.
But if you can help it, doing the “bare minimum” is probably not the best way to start your business. There are plenty of discretionary costs you can pay for certain services that make life easier. Here, we’ll dig into those costs—and why you might consider paying them.
1. Name reservation application
Naming things can be a bit tricky; after all, sometimes inspiration is a little lacking! And since Colorado doesn’t allow you to use a name that someone else has already claimed, you have to work even harder to pick one that’s unique, memorable, and just right for your business.
It’s a multi-step process, really: you have to brainstorm name ideas, choose just the right words, meet state name requirements, and of course, ensure that the name isn’t already in use (you can check using a Name Availability Search).
If you’re like a lot of people, you probably want to ensure that your hard work doesn’t go to waste once you’ve created the perfect name. So you have to lay claim to your new business name. You can do so either by filing your Articles of Organization, or by filing a Statement of Reservation of Name. You should only file this form if you’re not yet ready to file your Articles. Otherwise, you’d be wasting your hard-earned cash. Colorado requires a $25 online-only filing fee. It protects your chosen name for 120 days, giving you the time you need to get ready to file your business officially.
2. Obtaining a Trade Name
Wait—didn’t we just cover business names? Yes. But there’s a distinction: your business name, which you’ll write in on your Articles of Organization, is the legal name of your business. A trade name, sometimes called a DBA, assumed name, or fictitious name, is like a nickname for your business. For example, your legal name might Joseph Smith, but your friends call you Joe for short. Joe is a perfectly valid name, but you can’t put it on legal paperwork. You’d have to legally change your name to do so.
A Trade Name acts kind of like a nickname for your business; some LLCs and corporations also use Trade Names to establish new product lines or new “businesses” under the LLC “parent company.” But regardless of why you use a Trade Name, if it differs from your legal name, you need to register it before you can use it.
Quick note: registering a Trade Name in Colorado does not prevent other people from using it as their Trade Name. Only the names of registered businesses (i.e., corporations, LLCs, etc.) are protected with exclusive name rights. Because of that, we recommend that you run a Business Database Search to determine if anyone else has already filed that Trade Name. If so, you can still use it, but originality is always the gold standard.
To register your Trade Name, you’ll need to file a Statement of Trade Name. Technically, you lay claim to a Trade Name by simply using it; however, you have to file an official statement within 30-60 days of using it (a slightly unique process, but that’s just how it works). There is a $20 fee for the application. For more information on this process, check out our guide to filing a Colorado Trade Name.
3. LLC formation services
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Paperwork is a massive hassle. And unless you’re starting an LLC to help other Colorado residents with their paperwork, odds are you don’t want to deal with much paperwork yourself.
The bad news? Paperwork is an unavoidable part of starting a Colorado LLC: the Articles of Organization, local license applications, professional license applications, annual reports—the list goes on and on. The good news? You can hire an LLC formation service to do the pesky paperwork for you.
Of course, there’s some cost involved. And while there are a lot of great LLC formation services, they aren’t all created equal. And they all have different price points.
Many LLC formation services offer a wide variety of packages, with basic options starting at low prices like $39 from Zen Business (one company, Incfile, even offers a starter package for $0). But if you’re willing to shell out some serious cash for comprehensive assistance, you’ll find package prices going as high as $799.
These services are completely optional; you can DIY your Colorado LLC formation. But many entrepreneurs find the time saved is worth the money. If you do opt to hire a service, please make sure you take the time to understand what you’re buying. Some services charge one-time fees, and others tack on “free services” that will cost you next year. If you don’t read the fine print, you can get slapped with unexpected service fees. And surprise bills are never fun.
4. CO Registered agent services
Colorado law clearly states that every LLC must designate a registered agent to act as a middleman between your business and the state. Long story short, the registered agent accepts service of process (and any other official communication from the state) on your behalf.
Technically, this is another thing you can DIY; Colorado allows you to serve as your own registered agent. However, in our opinion, it’s worth the expense to hire a registered agent.
Why? For starters, a registered agent’s address becomes part of the public record; anyone in the state can find that address. That leads to spam mail (sometimes worse). Plus, a registered agent must be present at the registered address during all standard business hours. If you serve as your own, you’d be tied down to your location constantly. A registered agent service prevents those annoyances. A service will also help you keep track of annual filing requirements, license renewals, and more.
These services typically charge an annual fee. For example, annual fees for our top 4 Colorado registered agent services range from $99 to $299 per year depending on the service you choose. That said, some offer the first year free if you use them as an LLC formation service.
Quick Note: If you need to later down the line, you can always change your registered agent.
5. Expedited filing fees
Most of your paperwork will be filed online, which Colorado processes in real time. So in most cases, your paperwork will be filed right away. That said, if you file anything by mail using paper forms, Colorado estimates that your turnaround time will range between 7-10 days.
If that’s too long to wait, Colorado does allow you to expedite your form, which cuts processing down to 3 days. The fee to expedite is $50. Since the expediting fee isn’t unreasonable, it might be worth the extra expense to expedite, but patience works, too. You can let your budget and your timetable be the deciding factors here.
6. Business attorneys
Starting a business is a complicated process. And it’s a legal one. We do our best to make the process seem less daunting with guides like this one. But at the end of the day, we can’t write a guide that would cover every single question every business will ever face. That’s because your business is unique.
Business attorneys, however, can talk you through all the nuances of forming and running your business. In many cases, the advice of an attorney can save you thousands by helping you avoid expensive legal mistakes.
However, the upfront costs of hiring a business attorney can be pretty pricey. For example, many attorneys charge per hour, with rates ranging between $150-$350. Others offer “LLC formation packages” for flat rates that fall between $500-$2000. And of course, those fees vary based on the attorney’s experience, location, and so on.
If you’d like to hire one, we recommend checking out sites like Avvo.com. Their database is nearly comprehensive, so it’s a great way to search Colorado business lawyers. You can also narrow results by location, cost, overall satisfaction rating, and more. It’s the best place to look to find the right legal consultation for your business.
Conclusion
Long story short: starting a Colorado LLC can be a pretty pricey endeavor. If you look at each cost separately, it doesn’t seem too bad (even the Articles of Organization are pretty affordable). But when you add them all up or tack on some additional services, the total price tag grows pretty quickly.
Thankfully, since you’ve read this guide, you know what you’re up against. And sometimes, knowing is half the battle—and now you’re armed with all the information you need to budget the start-up costs so you can start your Colorado LLC off on the right foot. We wish you and your new business the best!