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The Colorado LLC operating agreement is a document that is used to provide legal liability protection for LLCs in addition to acting as a guideline for operation of the business. It helps to separate individual assets from those of the company, and can be used to outline individual rights and responsibilities of the members involved.

From CO§ 7-80-102:

(11)(a) “Operating agreement” means any agreement of all of the members as to the affairs of a limited liability company and the conduct of its business.  Except as otherwise provided in this article or as otherwise required by a written operating agreement, the operating agreement need not be in writing.  An operating agreement may contain any provisions required or permitted by section 7-80-108(1) .  An operating agreement includes any amendments to the operating agreement.
(b) In the case of a limited liability company with only one member, “operating agreement” includes:
(I) Any writing, without regard to whether such writing otherwise constitutes an agreement, as to such company’s affairs and the conduct of the limited liability company’s business signed by the sole member;
(II) Any written agreement between the member and the company as to the limited liability company’s affairs and the conduct of the limited liability company’s business;  or
(III) Any agreement, whether or not the agreement is in writing, between the member and the limited liability company as to a limited liability company’s affairs and the conduct of its business if the limited liability company is managed by a manager who is a person other than the member.

 

Colorado Operating Agreement Law

Per Colorado Revised Statutes Title 7. Corporations and Associations § 7-80-108:

(1)(a) The operating agreement may contain any provisions for the affairs of the limited liability company and the conduct of its business to the extent such provisions are consistent with law.  Except as otherwise provided in subsection (1.5), (2), or (3) of this section, an operating agreement governs the rights, duties, limitations, qualifications, and relations among the managers, the members, the members’ assignees and transferees, and the limited liability company.  Such provisions shall control over any provision of this article to the contrary except as set forth in subsection (1.5), (2), or (3) of this section.  To the extent the operating agreement does not otherwise provide, this article shall control.

(b) A limited liability company is bound by any operating agreement of its members.

(c) An operating agreement may be entered into before, after, or at the time of filing of articles of organization and, whether entered into before, after, or at the time of such filing, may be made effective as of the formation of the limited liability company or as of the time or date provided in the operating agreement.

(1.5) To the extent that a member or manager or other person that is a party to, or is otherwise bound by, the operating agreement has duties, including, but not limited to, fiduciary duties, to a limited liability company or to another member, manager, or other person that is a party to or is otherwise bound by an operating agreement, the duties of such member, manager, or other person may be restricted or eliminated by provisions in the operating agreement, as long as any such provision is not manifestly unreasonable.

(2) An operating agreement may not:

(b) Unreasonably restrict the rights of members and managers under section 7-80-408 ;

(d) Eliminate the obligation of good faith and fair dealing under section 7-80-404 (3) ;  except that the operating agreement may prescribe the standards by which the performance of the obligation is to be measured, if such standards are not unreasonable;

(d.5) Eliminate or modify the provisions of section 7-80-801(1)(c) (I) , except to extend the time set forth therein to a time not later than the first anniversary of the date of the termination of the membership of the last remaining member;  or

(e) Restrict rights of, or impose duties on, persons other than the members, their assignees and transferees, and the limited liability company without the consent of such persons.

(2.5)(a) An operating agreement may contain one or more provisions concerning the enforcement, interpretation, construction, application, severability of provisions, integration, effect of parole evidence, and other matters with respect to the operating agreement or any of its provisions.

(b) Unless otherwise provided in the operating agreement, if any provision of an operating agreement or application thereof to any person or circumstance is unenforceable or otherwise invalid under subsection (1.5) or (2) of this section or otherwise, the provision shall be limited, construed, and applied in a manner that is valid and enforceable, and, in any event, the remaining provisions of the operating agreement shall be given effect without the invalid provision or application.

(c) Unless otherwise provided in the operating agreement with respect to the unenforceability, invalidity, or application of any provision of the operating agreement under subsection (1.5) or (2) of this section, when it is claimed or appears to the court that any provision of the operating agreement may violate subsection (1.5) or (2) of this section, the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose, and effect, to aid the court in making the determination.

(3) Unless contained in a written operating agreement or other writing approved in accordance with a written operating agreement, no operating agreement may:

(d) Vary any requirement under this article that a particular action or provision be reflected in a writing.

(4) It is the intent of this article to give the maximum effect to the principle of freedom of contract and to the enforceability of operating agreements.

(5) An operating agreement is not subject to any statute of frauds, including section 38-10-112, C.R.S ., regarding void agreements, but not including any requirement under this article that a particular action or provision be reflected in a writing.

Forming an LLC in Colorado

  1. Conduct a name search
  2. Choose a registered agent
  3. File formation articles
  4. Draft an operating agreement

To file formation articles, Colorado LLCs need a legally registered business name. The name must be unique and dissimilar from all other businesses in the state, may not infringe on trademarks, may not include designators for other business types like “inc”, and must include either:

  • LLC
  • L.L.C.
  • Limited Liability Company
  • Ltd. Liability Company
  • Limited Liability Co.
  • Ltd. Liability Co.
  • Limited
  • Ltd.

The name may include titles related to the professional business type being included (university, attorney, bank), but there may be additional verification and there should be a licensed practitioner that is part of the LLC.

The name cannot include government agencies such as DEA, FBI, or CIA.

To conduct the name search, use the Colorado Secretary of State Business Entity Search website.

Step 2: Choose Your Registered Agent

All Colorado LLCs need to appoint a registered agent that will act as their legal representative for handling service of process and other legal documentation for the business.

An individual may be appointed as the registered agent, and may be anyone who fits the following criteria:

The agent must:

  • Be 18 years or older
  • Be a resident of the state
  • Have a physical (not a P.O. Box) address in Colorado, as well as a mailing address within the state

A business may also be used as a registered agent. These registered agent services must be authorized to do business in the state to qualify, but cost a yearly fee.

Step 3: File Your Formation Articles

In Colorado, Domestic LLC formations (in-state) must complete formation articles in the form of Articles of Organization to be recognized as an LLC. These can only be submitted online.

Online Filing (Domestic):

Foreign LLCs must complete a Statement of Foreign Entity Authority, which is the equivalent of Articles of Organization for out-of-state entities.

Online Filing (Foreign):

Step 4: Draft a Colorado Operating Agreement

It is recommended that all Colorado LLCs create an operating agreement as part of their new formation regardless of company size. The document helps protect legal liability in the case of litigation for single-member LLCs and outlines individual rights and responsibilities for each member of a multi-member LLC, making it great for keeping each member accountable.

The document can settle disputes between multiple directors or act as proof in court of liabilities within the company itself or from a third party. It is recommended that all directors each keep a copy, and that a copy is held with the other business records until needed.

The operating agreement does not need to be filed with the state of Colorado to be enforceable.

Additional Resources