In this Article, we will give you a snapshot of the legal compliance requirement and associated fees required to register Limited Liability Company (LLC) in Colorado and most importantly, maintain the status of an LLC, especially as a small business e-commerce start up.
In the United States, LLCs are registered on the state level, therefore you can register an LLC in any of the 50 States in the United States, including Washington DC.
You can check out our the best states in the US to register your LLC as a small business e-commerce start-up, if you want to pay less State fees, less State imposed taxes and do less periodic paperwork in order to maintain your LLC.
In this Article, our focus is on Colorado LLC. What cost should you expect to pay when you register a Colorado LLC? What periodic filings requirements are imposed on Colorado LLCs? What State taxes are levied on e-commerce small business start ups in Colorado and what are the tax rates? What business permits are required to be obtained by e-commerce businesses in Colorado, what’s the cost of these permits and are there any renewal requirements?
This Article presents you a snapshot, so you know what fees and legal compliance requirements to expect if you want to register an LLC for your e-commerce small business start up in Colorado, operate with the required licenses and maintain your LLC status.
Business registration and compliance in Colorado.
- LLC Registration cost; the state fee for registering an LLC in Colorado is $50. You can register your Colorado LLC with Bizee for a service charge of $0 + the State fee.
- LLC registration Publishing requirement; No, LLCs in Colorado are not required to publish their registration in a local newspaper.
- Has the Option to register as an Anonymous LLC; LLCs in Colorado have the option to register as an anonymous LLC. This means that the LLC can be registered without putting the names and personal details of the LLC Owners on public record of the State.
- DBA requirement; DBA is required if your LLC is operating under a different name than your LLC registered name. In Colorado DBA is referred to as a “Trade name”. Cost of registering a Trade name in Colorado is $20, the Trade name length of approval is 1 year. You can register a trade name in Colorado online or outsource the registration of your Alabama DBA (if needed) to Bizee.
- Annual report filing requirement; yes, Colorado LLCs have annual report filing requirements. The cost of filing annual report is $10
You can file the Colorado annual returns yourself, you’ll need to visit the Colorado Secretary of State or you can outsource the filling of your annual returns to Bizee for a $99 service charge.
Annual Franchise tax filing and compliance in Colorado
State Franchise tax requirement; No, LLCs are not required to pay Franchise tax in Colorado.
Annual State income tax filing and compliance in Colorado
State income tax requirement; Colorado imposes a flat 4.40 percent state individual income tax rate and a 4.40 percent corporate income tax rate. Additionally, certain jurisdictions within the state levy local income taxes.
- Who files State income tax; LLCs by default are passed through entities meaning that tax obligation passes through to the individuals who own the LLC. Therefore an LLC with a default tax status pays the individual state income tax. Interestingly, if the individuals behind the LLC are not resident in the state and do not have state source income (a dependent agent in the state), then they are not required to pay “individual State income tax”.
If the LLC owners are resident in the State or have State source income (a dependent agent in the state), then the LLC Owners are required to pay “individual State income tax”.
If the LLC has elected to be taxed as a corporation (C-corp), then the LLC is required to pay “Corporate State income tax”.
- How to file state income tax; You can file your Colorado State income tax by yourself. You will need to visit the State website. Alternatively, we recommend using the Service of a Certified Public Accountant (CPA), through H&R Block to file your state income tax.
Periodic Sales tax filing and compliance in Colorado
- Sales tax requirement; Colorado has a 2.90 percent state sales tax rate, with a maximum local sales tax rate of 8.30 percent. The average combined state and local sales tax rate in Colorado is 7.78 percent.
- Sales tax nexus; Sales tax nexus is the state-defined threshold between a Seller and a state, which when reached makes it obligatory for the Seller to register for a Seller permit in the state, charge sales tax to customers in the state and remit the sales tax to the State Government.
Generally, there is the “physical sales tax nexus” and “economic sales tax nexus”.
Physical sales tax nexus is reached when the Seller had physical presence in the state (i.e have an office address, a warehouse etc).
In most States, “economic sales tax nexus” is reached when a Seller makes up to 200 transactions or $100,000 in sales in a State.
It’s important to note that, when you register your LLC in the State of Colorado (which generally requires that you have a registered business address in Colorado), you automatically meet the physical sales tax nexus and will be required to obtain a Sales tax permit in Colorado, charge applicable sales tax rates to customers in Colorado and remit sales tax to the Colorado State Government.
Sales tax permit; It costs $16 plus a one time refundable fee of $50 to register for a Colorado Colorado sales tax license, but a security deposit may be required. Colorado Sales tax permits are valid as long as the Business is in Operation.
Reseller/Resale Certificate; Businesses who purchase products from their suppliers for the purpose of reselling those products to their customers can make sales tax free purchases from their suppliers if they have a resale certificate.
This means that Resale businesses can get cheaper product prices from their suppliers (that is product prices without sales tax included) which can help these Businesses have a higher profit margin and/or maintain competitive selling prices to their Customers.
Generally, suppliers will charge the sales tax rate applicable in the State where the product is to be delivered unless the business presents to the supplier a Resale Certificate (also called a Reseller Certificate).
The Resale certificate must be valid and acceptable in the state where the product is to be delivered.
Businesses can present any of the below listed Resale certificates to suppliers if they want to make sales tax free purchases for product delivery to an Colorado address.
- Multijurisdiction sales tax exemption certificate | DR 0563
- MTC Uniform Sales & Use Tax Resale Certificate (The MTC form serves as a uniform resale certificate for various states, streamlining the process by replacing the need for multiple state-specific resale forms when dealing with your supplier.)
Note; Colorado accepts the use of out-of-State Seller ID.
This means that Resale Businesses seeking sales-tax-free purchases in Alaska can use an out-of-state seller ID (i.e a seller ID issued by another US state or their home state) to fill-out the MTC uniform resale certificate. They can indicate an out-of-state seller ID as their Colorado Seller ID on the MTC form.
In Colorado, A blanket Resale certificate (This means that the resale certificate is kept on file by the Supplier to cover multiple purchase transactions between a specific Supplier and Reseller) appears that the blanket certificate does not expire as long as the information on the form is still valid.
Conclusion
This Article shows you a snapshot of the legal fillings and compliance requirements for LLCs that are registered in Colorado, specifically for LLCs that want to carry on the business of selling and especially for small e-commerce start up LLCs that are registered in Colorado.
If you are wondering what might be the best State in the United States to register your small business (especially if you are a reseller or an e-commerce business), we have written this Article, where we go over our most recommended states for registering a business in the United States, if you want to pay less LLC filing and legal compliance fees, if you want less state imposed taxes and if you want to do less periodic legal paperwork required to maintain your LLC status.
