How to Move an LLC to Colorado

There are many reasons why a business owner may want to move an LLC to Colorado. This article discusses the use of conversion, known in some states as LLC domestication, to transfer an LLC to Colorado.

What is Colorado LLC Conversion?

Colorado conversion is a statutory process that lets business owners officially move an out-of-state LLC to Colorado.¹ An out-of-state LLC that converts to a Colorado LLC changes its state of organization—or charter state—to Colorado. After conversion, the company is a Colorado LLC governed by the Colorado Limited Liability Company Act.² The LLC’s owners may choose to relocate the business’s main office to Colorado, but that is not required.

Some states call the process of changing an LLC’s charter state domestication instead of conversion. Colorado uses conversion, and Colorado also calls a procedure that changes an LLC into a corporation (or vice versa) a conversion.³ This article’s focus is conversion of an out-of-state LLC into a Colorado LLC.⁴

Why Transfer an LLC to Colorado?

An out-of-state LLC’s owners might convert to a Colorado LLC for a specific, well-defined goal. Or, conversion may be for simple convenience. An out-of-state LLC might want to change its state of organization to Colorado for any of the following reasons:

• Decreased compliance burden and costs. A Colorado conversion may reduce an LLC’s annual reporting burden. An out-of-state LLC that does business mostly in Colorado often has to file annual reports in both states. Conversion to Colorado reduces paperwork and filing fees if it eliminates annual reporting requirements in the LLC’s former state. Annual reporting for LLCs in Colorado is easy and inexpensive.
• Convenience. LLC owners who move often bring their businesses with them. A business owner who moves to Colorado may want his or her new state of residence to govern the business. Management may be simpler if the LLC is organized and physically located in the same state. A Colorado-based business that identifies itself as a Colorado LLC may also have marketing advantages.
• Tax savings. Tax climates vary greatly between states. Conversion to Colorado may lower an LLC’s tax burden. A state’s right to tax a business requires a sufficient connection—or nexus—between the business and the state. An LLC that converts to Colorado may reduce its total tax liability if it severs the nexus that let the former state tax the company. LLC owners who move may also pay lower personal income taxes after conversion. California and Oregon, for example, both have top personal income tax rates more than double Colorado’s.
• Friendlier legal environment. Conversion could be a prudent business strategy if the legal climate in Colorado is better suited to an LLC’s long-term growth plans than in its current state. In that case, a Colorado LLC conversion enhances the business’s chances of success. Conversion could also be wise if the owners want to pursue a type of business that the current state does not allow. Or Colorado’s LLC Act may allow for management flexibility not possible in the current state.
• Professional networking. A Colorado-based business will have an easier time finding local lawyers, accountants, and other professionals who know Colorado law. An LLC chartered out-of-state but physically located in Colorado often has fewer local options. The business may need to hire professionals in other states—which reduces opportunities for face-to-face meetings and may increase costs.

What are the Benefits of Colorado LLC Conversion?

A Colorado LLC conversion is the smoothest and most cost-effective way to formally move an out-of-state LLC to Colorado. Other options—such as a merger or dissolving the out-of-state LLC and forming a new Colorado LLC—are more disruptive and costly. Conversion involves minimal organizational interruptions.

During and after a Colorado conversion, an LLC:

• Continues business operations. Conversion is a process that occurs mostly on paper. A converting LLC continues normal operations throughout its conversion to Colorado. The owner does not need to start new employment relationships, end old ones, or change day-to-day functioning.
• Retains its EIN. Conversion does not affect an LLC’s Employer Identification Number (EIN). A converted Colorado LLC remains the same entity with the same tax identity.⁵ A changed EIN—often necessary for other relocation methods—is inconvenient and can cause tax problems and organizational confusion.
• Keeps existing financial accounts. An LLC’s assets and debts survive the conversion process. A converting LLC need not open new bank accounts or close existing accounts. If desired, it may choose to form a relationship with a Colorado bank for convenience.
• Preserves contractual relationships. Conversion does not change an LLC’s contractual rights and obligations.⁶ The converted Colorado LLC continues the business relationships it had in its former state. Existing contracts still hold legal force.
• Avoids closing and dissolving. A Colorado LLC conversion does not close the business. Winding down, dissolution, and asset distribution are all unnecessary.⁷ Other strategies for changing an LLC’s charter state require winding down and dissolution—which are expensive and procedurally burdensome.
• Ends foreign entity registration. Registering as an out-of-state entity is not part of a Colorado LLC conversion. The converted business is a Colorado LLC, so registering as an out-of-state—or foreign—LLC in Colorado is unnecessary.⁸ A converting LLC needs to register as an out-of-state entity in its original state only if it plans to continue doing business there.

What LLCs can Convert to Colorado LLCs?

Colorado LLC conversion is not possible for all businesses. An out-of-state LLC can become a Colorado LLC only if its current state has a statute authorizing LLC conversions.⁹ Thirty-seven states currently have statutory conversion (called domestication in some states) procedures.

Colorado must also allow the type of business that the LLC performs. An out-of-state LLC engaged in business activities that are unlawful in Colorado cannot successfully move to Colorado unless it changes its business.

Some states do not let LLCs provide professional services—such as accounting or law. Colorado law allows professional limited liability companies—or PLLCs—for many professions.¹⁰ A Colorado PLLC must meet Colorado’s regulatory and licensing requirements.

Finally, an out-of-state LLC cannot convert to Colorado if its governing documents—articles of organization and operating agreement—prevent the company from changing states. An LLC with governing documents that prohibit conversion must amend the documents before conversion is possible.

How Much Does Colorado LLC Conversion Cost?

An out-of-state LLC’s total costs for an LLC conversion to Colorado include labor costs, filing fees, and costs associated with maintaining a registered agent in Colorado.

Labor Costs

Labor costs are the amounts paid to the service provider who handles the conversion process for the out-of-state LLC. Provider charges typically include work time spent on these tasks:

• Gathering information;
• Preparing paperwork;
• Handing out documents for review and signing;
• Filing forms with the secretary of state’s office; and
• Communications with business owners and state agencies.

Precise provider costs can vary quite a bit depending on the provider.

Filing Fees

The Colorado Secretary of State charges a $100.00 filing fee for the combined statement of conversion when out-of-state LLCs convert to Colorado.¹¹ The fee includes $50.00 for the LLC’s articles of organization, which is part of the combined statement of conversion.

A converting LLC’s current state will also charge a filing fee to entities moving out of state. Colorado’s fee for outgoing LLCs, for example, is $50.00.

Registered Agent Fees

An LLC organized or authorized to conduct business in Colorado must have a registered agent with authority to accept service for the LLC. ¹² An out-of-state LLC that converts to Colorado names a registered agent within the combined statement of conversion.

A Colorado registered agent must be a natural person who lives in Colorado or an entity with a usual place of business in Colorado. A registered agent’s name and address are public records listed with the secretary of state and visible to the general public.

An LLC member or manager living in Colorado may serve as the company’s registered agent. Commercial registered agents offer the benefit of keeping business owners’ personal information private. They typically charge around $125.00 per year.

How Long Does Colorado LLC Conversion Take?

The total time necessary for a Colorado LLC conversion varies for each conversion. It depends on factors like:

• The document preparer’s time gathering necessary information;
• The document preparer’s time preparing paperwork;
• The time needed by the LLC’s members and managers to review and sign the documents;
• The LLC’s current charter state’s conversion requirements; and
• The Colorado Secretary of State’s processing time.

The Colorado Secretary of State’s office states that documents filed using its electronic filing system are processed immediately. However, regular systems maintenance sometimes makes it take a bit longer. The estimated processing time for paper filings is 7–10 business days from the date of receipt. Most converting LLCs must file electronically.

What Laws Govern Colorado LLC Conversion?

An out-of-state LLC changing its charter state to Colorado must account for two sets of laws—Colorado and the LLC’s current state. Colorado governs eligibility and the conversion process generally—as described in this article. The current state’s laws govern the following aspects of the process:

• Authority for conversion. The LLC’s current state must allow LLCs organized in that state to convert to other states. An LLC currently organized in a state that does not allow conversion cannot convert to Colorado.¹³
• Plan of conversion contents. The LLC’s current state sets the requirements for the LLC’s plan of conversion (the document setting forth the LLC’s conversion terms and strategy).¹⁴ The current state defines what must be in the plan and sets the standard for approval by the LLC’s members or managers. A plan of conversion must also meet Colorado’s requirements.¹⁵
• Conversion effective date. The LLC’s current state ordinarily determines when a conversion becomes effective.¹⁶ If the current state’s conversion statute does not set an effective date, conversion becomes effective when the LLC files its statement of conversion in Colorado or on a delayed effective date specified in the statement of conversions.
• State exit requirements. An LLC’s current state may have other requirements for outgoing companies. For instance, an LLC leaving Colorado must file a statement of conversion that slightly differs from the document required when moving to Colorado.¹⁷

State conversion statutes are often similarly structured but can have major differences between states. The other states conversion law may include provisions that affect other parts of the conversion process.

What is the Colorado LLC Conversion Process?

The Colorado LLC conversion process consists of two components: document preparation and administrative tasks.

Document Preparation

A Colorado LLC conversion requires two important documents: a plan of conversion and a Colorado combined statement of conversion. An LLC’s current state will require at least one other filing for LLCs converting to another state. All documents must be carefully prepared so that they are consistent with both states’ laws.

• Plan of Conversion. A Plan of Conversion that is designed to comply with the requirements of both Colorado law and the law of the state that the LLC is moving from.
• Colorado Statement of Conversion. The Colorado Statement of Conversion with all information and any related documents needed for filing with the Business Organizations of the Secretary of State.
• Conversion Document for Filing in Prior State. Depending on state law, this document may be called articles of domestication, statement of domestication, articles of conversion, certificate of conversion, statement of conversion, certificate of conversion, or a similar term.¹⁸
• Colorado Operating Agreement. A state-specific Operating Agreement to properly structure the LLC as a Colorado LLC, provide rules for profit distributions and decision-making, clarify the federal income tax classification, and help provide maximum liability protection.
• Resolution Authorizing Conversion. A resolution approving the transaction and adopting the Colorado organizational documents as the LLC’s governing documents.

Administrative Tasks

An LLC that has prepared the necessary documents must also complete several administrative tasks needed to make the conversion effective and officially establish the LLC’s existence as a Colorado LLC.

• Conduct preliminary name search. Check the official records of the Secretary of State’s Business Organizations Office to determine whether the LLC’s name is available in Colorado. (If the name is unavailable, a slight name change may be required to complete the conversion.)
• Obtain signatures on the Statement of Conversion. The Statement of Conversion must be signed by the required parties. The Secretary of State’s Business Organizations Office allows the Statement of Conversion to be e-signed.
• File the Statement of Conversion. File the Statement of Conversion with the Secretary of State’s Business Organizations Office. The Articles of Organization may be e-filed.
• File conversion documents with prior state. File the conversion documents with the Secretary of State or equivalent agency for the state that the LLC is moving from.

What is the Legal Effect of Colorado LLC Conversion?

An LLC that completes a Colorado conversion remains fundamentally the same entity before and after the conversion.¹⁹ The post-conversion LLC—though—is a Colorado LLC formed under the Colorado Limited Liability Company Act.²⁰

Notable legal effects of a Colorado LLC conversion include the following:

• Entity governance. Colorado law, the LLC’s new articles of organization, and the company’s operating agreement govern the post-conversion LLC.²¹
• Day-to-day operations. The LLC continues usual operations during and after a Colorado conversion except to the extent the plan of conversion, updated governing documents, or the change to Colorado law calls for altered operations. The company has the same tax identity and continues using the same EIN.²²
• Assets and liabilities. A Colorado conversion does not affect an LLC’s assets or liabilities, and any existing contractual rights and obligations survive the conversion.²³ An LLC need not sign deeds or other documents to transfer LLC assets. However, an LLC may wish to do so if its name changes during the conversion.
• Legal proceedings. A post-conversion Colorado LLC continues any lawsuits or other legal processes in which the LLC was involved before conversion.²⁴
• Membership interests. A Colorado LLC conversion does not affect ownership of the LLC unless the plan of conversion describes a change in ownership.²⁵
• Member liability. A member who personally guaranteed company debts before conversion remains personally obligated for the same debts after conversion.²⁶ Conversion does not result in additional member liability for company debts.
• Asset distribution and closing. A Colorado LLC conversion does not trigger existing company obligations—and neither asset distribution nor winding up of affairs is necessary—unless the LLC’s plan of conversion or a separate contract expressly provides otherwise.²⁷

In summary, the legal effect of a Colorado LLC conversion is that the business becomes a Colorado LLC governed by Colorado law. It keeps the same identity and continues functioning as normal during and after conversion.

1. Colo. Rev. Stat. § 7-90-201(2).
2. Colo. Rev. Stat. § 7-90-102.5; Colo. Rev. Stat. § 7-90-202.
3. Colo. Rev. Stat. § 7-90-201(1).
4. Colorado law calls an LLC organized in another state a foreign entity or foreign LLC. For clarity, this article uses the more descriptive term out-of-state LLC. See, e.g., Colo. Rev. Stat. § 7-90-102(23).
5. Colo. Rev. Stat. § 7-90-202(4).
6. Colo. Rev. Stat. § 7-90-202(2).
7. Colo. Rev. Stat. § 7-90-202(3).
8. See Colo. Rev. Stat. § 7-90-803.
9. Colo. Rev. Stat. § 7-90-201(2).
10. See Colo. Rev. Stat. § 7-90-601(5); Tit. 12: Professions and Occupations, Colo. Rev. Stat. §§ 12-1-101, et seq.
11. See Colo. Rev. Stat. § 24-21-104.
12. Colo. Rev. Stat. § 7-90-701.
13. Colo. Rev. Stat. § 7-90-201(2).
14. Colo. Rev. Stat. § 7-90-201(2).
15. Colo. Rev. Stat. §§ 7-90-201.3(a)-(c).
16. Colo. Rev. Stat. § 7-90-201.7(4).
17. Colo. Rev. Stat. § 7-90-201.7(1).
18. Fourteen states use the term articles of domestication to refer to the document that must be filed with the state to approve the domestication: Iowa, Massachusetts, Minnesota, Nebraska, New Hampshire, New Jersey, North Dakota, South Dakota, Utah, Vermont, Virginia, Wisconsin, Wyoming, and Indiana. The corresponding document may be called a statement of domestication (Alaska, Arizona, Connecticut, Idaho, Illinois, Mississippi, and Pennsylvania); articles of conversion (Florida, Nevada, North Carolina, Oregon, and Washington) or certificate of conversion (California, Delaware, Georgia, Michigan, Ohio, and Texas). It may also be called a statement of conversion (Colorado, Maine), certificate of domestication (Kansas), request for conversion (Louisiana), or statement/plan of domestication (District of Columbia).
19. Colo. Rev. Stat. § 7-90-202(4).
20. Colo. Rev. Stat. §§ 7-80-101, et seq.
21. Colo. Rev. Stat. § 7-90-102.5; Colo. Rev. Stat. § 7-80-108.
22. Colo. Rev. Stat. § 7-90-202(4).
23. Colo. Rev. Stat. § 7-90-202(2).
24. Colo. Rev. Stat. § 7-90-102(52).
25. See Colo. Rev. Stat. § 7-90-201.3(c).
26. Colo. Rev. Stat. § 7-90-202(2).
27. Colo. Rev. Stat. § 7-90-202(3).