Colorado Limited Liability Company
Operate your Colorado Limited Liability Company Legally
Call our Denver Colorado Business Lawyers to Stay in Compliance – 1-866-601-5518.
A limited liability company (LLC) is a flexible form of enterprise that blends elements of partnership and corporate structures. Forming Colorado limited liability company (LLC) takes more than simply formation with the Secretary of State. Business owners must seriously take to the time out to understand the legal obligations to the business and any other members of the LLC.
- Understand your rights before costly litigation arises.
- Ensure that you are personally protected.
- Apply Colorado LLC laws to ensure protection.
The Denver business law attorneys at Watson & Associates, LLC provide legal advice and representation in matters pertaining to:
- Formation and Incorporation
- Advice on legal responsibility to the business
- Representation in personal liability disputes
- Drafting operating agreements
- Purchase and sale of businesses
- Civil litigation
- Partnership disputes
Limited Liability Basics
A Limited Liability Company (LLC) is a business structure allowed by Colorado statute. LLCs are popular because, similar to a corporation, owners have limited personal liability for the debts and actions of the LLC. Other features of LLCs are more like a partnership, providing management flexibility and the benefit of pass-through taxation.
When you form a Colorado LLC, consulting with the Denver lawyers at Watson & Associates, LLC can position you to operate the business with at least the basic understanding of Colorado laws. Given the lack of clear understanding of how your LLC must operate, you can get legal advice from our Denver firm that helps you make the right decisions.
Lawyers helping you to avoid some of the most costly mistakes in business
As a Colorado limited liability company, you should learn to avoid some of the most costly business mistakes. They include:
- Forming an LLC and having it managed by Members instead of Managers
- Forming an S corporation and NOT knowing the shareholder rules
- Forming an S corporation when your company anticipates future value
- NOT completing the LLC operating agreement
- NOT properly capitalizing the entity, and especially not being crystal clear with partners about your capitalization
- Putting LLC Members on payroll vs guaranteed payments
- Forming an LLC taxed as an S corporation and having the incorrect operating agreement
Owners of an LLC are called members. Since most states do not restrict ownership, members may include individuals, corporations, other LLCs and foreign entities. There is no maximum number of members. Most states also permit “single member” LLCs, those having only one owner.
A few types of businesses generally cannot be LLCs, such as banks and insurance companies. Find out about Colorado’s requirements and the federal tax regulations for further information. There are special rules for foreign LLCs.
Piercing the LLC Veil: “Piercing the corporate veil” is the equitable remedy courts use to disregard the corporate structure, and this can translate into a piercing of the “LLC veil.” If a corporation is found not to be operating in observance of the formalities, an owner is exercising excess control, funds are being grossly misappropriated for the benefit of an owner, or if the corporation is deemed to be operated in such a manner as to cause harm to another entity, the courts can pierce the corporate veil and make the owner(s) personally liable for any debts or obligations of the company. The same can be true, although admittedly to a lesser extent, of an LLC. If a member exercises excess control over the entity, if the member in control engages in improper conduct in the exercise of control over the entity; and this improper conduct causes another entity to be denied adequate remedy in a lawsuit or business transaction proceeding, some courts may “pierce the LLC veil” and make the members or managing member directly responsible for the debt or obligation. Consult with our business lawyers for additional help.
Traditionally, Colorado courts have looked at numerous factors to determine whether a controlling member/shareholder engaged in improper conduct. Chief among these factors would be the lack of an operating agreement, or a poorly written one. Too, a failure to maintain adequate records of acquisitions, business transactions, and in some states, minutes of meetings could lead a court to disregard the entity and hold the controlling member personally liable.
Contact our LLC Attorneys for immediate help. Call 720-941-7200.
The federal government does not recognize an LLC as a classification for federal tax purposes. An LLC business entity must file a corporation, partnership or sole proprietorship tax return.
An LLC that is not automatically classified as a corporation can file Form 8832 to elect their business entity classification. A Colorado business with at least 2 members can choose to be classified as an association taxable as a corporation or a partnership, and a business entity with a single member can choose to be classified as either an association taxable as a corporation or disregarded as an entity separate from its owner, a “disregarded entity.” Form 8832 is also filed to change the LLC’s classification.
Effective Date of Election
The election to be taxed as the new entity will be in effect on the date the LLC enters on line 8 of Form 8832. However, if the LLC does not enter a date, the election will be in effect as of the form’s filing date. The election cannot take place more than 75 days prior to the date that the LLC files Form 8832 and the LLC cannot make the election effective for a date that is more than 12 months after it files Form 8832. However, if the election is the “initial classification election,” and not a request to change the entity classification, there is relief available for a late election (more than 75 days before the filing of the Form 8832.
If you need legal advice or representation for your Colorado LLC, contact our Denver lawyers at 1-866-601-5518 for a free initial consultation.
- Forming a Limited Liability Company
- Single Member Limited Liability Companies
- LLC Filing as a Corporation or Partnership
- Possible Repercussions
- Forms for Limited Liability Companies
- Form 8832
- Where to File Tax Returns – Addresses Listed by Return Type