If you own a business that was created in a state other than Colorado, you will need to qualify or register that business in Colorado if you want to do business there. Here is an overview of the rules on how to qualify your foreign (non-Colorado) limited liability company (LLC) to do business in Colorado.
For Colorado purposes, if your LLC is formed in another state, then it is known as a foreign LLC in Colorado. In other words, foreign doesn’t mean from another country. Instead, it means your business was organized under the laws of another state. A domestic LLC, on the other hand, is one that is formed in the state where it is doing business. This is common usage throughout the United States. For example, an LLC formed in Alabama is a foreign LLC in Mississippi.
According to the Foreign Entities section of Colorado’s Corporations and Associations Act, you are required to register your foreign company with the state of Colorado if you are “transacting business” or “conducting activities” in Colorado. (The Act uses the both phrases.) What does this mean? Well, like most states, Colorado does not specifically define what “transacting business” or “conducting activities” means in relation to foreign registrations.
However, state laws governing when foreign companies must collect state sales tax in their state provide some guidance on the issue. Under these laws, a business must have a physical presence in—or nexus with—the state in order to be required to collect state sales tax on sales to that state’s residents. Generally speaking, physical presence and nexus are synonymous, and mean having:
Certain exceptions may apply and the rules get more complicated with things like Internet sales. Nevertheless, in general, if you have an office, a store, a warehouse, or employees in another state, you will need to qualify your LLC as a foreign company in that state. For more details, including some possible distinctions between physical presence and nexus, check Nolo’s articles on Internet Sales Tax: A 50-State Guide to State Laws.
Like many states, Colorado law specifies certain activities that do not constitute transacting business in the state. The items listed include:
The law specifically states that this list is not exhaustive. For the actual legal description of each of these items, check Section 7-90-801 of the Colorado Revised Statutes.
If your LLC’s only activity in Colorado is one or more of the listed items, you should not need to register with the state.
To register your foreign business in Colorado, you must file a Statement of Foreign Entity Authority with theColorado Secretary of State (SOS). You must file online. While there is no blank paper form available, the SOS does have a sample form that you can download from their website and review.
To complete the form, you must provide much of the same information that you need to create an LLC in your home state. However, since every state is a little different, there may be items that Colorado asks for that you did not need to provide when you first organized your LLC. More specifically, for a Colorado Statement of Foreign Entity Authority, you need to provide:
The SOS has a webpage with instructions for completing the form. If the name under which you originally created your LLC is not available in Colorado (usually due to the fact that some other registered business is already using it), you will need to use an assumed name for your business. The filing fee for the Statement of Foreign Entity Authority is $100.
If your LLC transacts business in Colorado without having filed and had accepted a Statement of Authority, it cannot bring a lawsuit in the state to collect debts. Moreover, if your LLC transacts or conducts business in Colorado without authority, it is liable for fees and penalties. However, not having a valid statement of authority does not invalidate your LLC’s acts in the state (such as making contracts) or defending a lawsuit in the state.
If your business is organized as a corporation rather than an LLC, the rules for registering as a foreign entity in Colorado are similar and you must file the same online form (Statement of Foreign Entity Authority). See the Colorado SOS website for more information and filing instructions.