How to Move an LLC to Colorado

An out-of-state LLC can change its state of organization to Colorado through statutory conversion. Colorado conversion is a legal transaction that changes an LLC’s state of organization, the state whose law primarily governs the company. An out-of-state LLC, also called a foreign LLC, that converts to Colorado becomes a Colorado LLC governed by the Colorado Limited Liability Company Act.

The LLC is otherwise the same business entity before and after the conversion process. Whether the conversion can proceed also depends on the laws of the state the LLC is leaving. To find out whether your LLC qualifies and what the process involves, our LLC Domestication Analyzer provides a detailed analysis of your specific move under both your current state’s law and Colorado law.

Some states use the name domestication for the legal procedure that changes an LLC’s state of organization, also called its domicile. In many of those states, a business can complete a domestication to change its domicile or to change its entity type. The same statutory process can accomplish either goal.

Colorado has two distinct procedures for LLCs. A Colorado conversion changes a company’s domicile only. A conversion also changes a business from one entity form to another. For example, a Colorado corporation might convert to an LLC. This article deals with conversions that change an out-of-state LLC into a Colorado LLC.

Why Business Owners Move LLCs to Colorado

A Colorado LLC conversion may make sense if a business owner moves to Colorado or if the owners prefer to have Colorado law govern the company. Business owners might convert to a Colorado LLC 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.

Colorado LLC Conversion Requirements

Colorado LLC conversion under Colo. Rev. Stat. section 7-90-201 is not available for every out-of-state LLC. An LLC converting to Colorado must comply with both Colorado law and the current state’s law. Colorado law controls the process and documents filed in Colorado and determines the conversion’s legal effects.

The current state’s law governs whether the LLC can convert to Colorado (the state must authorize conversion), the content of the written plan of conversion if required, the standard under which the LLC’s members or managers must approve the plan of conversion, and the effective date for the conversion.

Eligibility for Colorado LLC Conversion

An LLC considering conversion to Colorado must confirm that it is eligible for the process. The principal requirement is that the current state must authorize LLC conversions. Not all states do. The current state may call the process conversion, domestication, or another name. The important part is that the state must have a statutory procedure that lets an LLC organized in that state change its state of organization to a new state.

Business owners must also review the LLC’s articles of organization and operating agreement to ensure there are no provisions that prevent conversion to a new state. If any restrictions are present, the LLC may need to formally amend the documents to allow the procedure.

An out-of-state LLC must also confirm that Colorado lets LLCs engage in the company’s field of business. Colorado allows most business areas other than acting as an insurance company. Some states prohibit LLCs from providing professional services, which are services that require a license or comparable authorization.

Colorado recognizes professional limited liability companies, LLCs that provide professional services. Professional LLCs are subject to additional legal requirements. An out-of-state LLC must also confirm that its area of business is lawful in Colorado in general. If Colorado prohibits the type of business in which the company is engaged, it should not convert to Colorado.

Required Documents for Colorado LLC Conversion

The Colorado LLC conversion process involves preparing and adopting several conversion documents that must satisfy both states’ requirements. The conversion documents memorialize the terms of the conversion and control the company when the conversion takes effect.

• Plan of Conversion. A Plan of Conversion 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 Colorado Secretary of State’s Business Organizations Office. The Colorado Statement of Conversion, combined with the LLC’s articles of organization, comprises the Combined Statement of Conversion and Articles of Organization for a Limited Liability Company (LLC).
• Conversion Document for Filing in Prior State. Depending on state law, this document may be called articles of conversion, statement of conversion, certificate of conversion, or a similar term.
• 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.

The Statement of Conversion accepts electronic signatures under Colorado law. Filing through the Colorado Secretary of State’s Business Organizations Office allows e-filing for electronically signed documents.

The LLC also completes several administrative tasks to implement the conversion. These tasks include conducting a preliminary name search with 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);

Obtaining signatures on the Statement of Conversion; filing the Statement of Conversion with the Colorado Secretary of State’s Business Organizations Office; and filing conversion documents with the Secretary of State or equivalent agency for the state that the LLC is moving from.

Cost of Moving an LLC to Colorado

The cost of moving an LLC to Colorado depends on the scope of work involved. The documents and filings described above require professional preparation to comply with both states’ requirements, and coordinating submissions with two separate state agencies adds further complexity. To find out what your specific move will cost, our LLC Domestication Analyzer provides a free analysis of your LLC move.

In addition to professional service costs, the Colorado Secretary of State charges $100.00 for the Combined Statement of Conversion and Articles of Organization filing fee when out-of-state LLCs convert to Colorado. This fee includes the $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.

Processing Time for Colorado LLC Conversion Filings

A Colorado LLC conversion proceeds in several steps. The length of the process depends on how long each step takes.

Each step depends on the responsible person’s turnaround time: the business owners’ time to organize the necessary information, the service provider’s time to review the information and prepare the conversion documents, the owners’ time to approve and sign the draft documents (or request revisions), the service provider’s time to file the final conversion documents with state agencies, and the state agencies’ time to accept and process the filed documents.

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 to 10 business days from the date of receipt. Most converting LLCs must file electronically. The conversion becomes effective when the Statement of Conversion becomes effective upon filing with the Colorado Secretary of State.

What Laws Govern Colorado LLC Conversion

An out-of-state LLC changing its state of organization to Colorado must account for two sets of laws: Colorado and the LLC’s current state. Colorado governs eligibility and the conversion process generally. The current state’s laws govern several 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.
• 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. 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.
• Conversion effective date. The LLC’s current state ordinarily determines when a conversion becomes effective. 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 conversion.
• 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 differs slightly from the document required when moving to Colorado.

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

Understanding the full conversion process, including document preparation and coordination between both states, is covered in detail in our guide to LLC conversion.

Legal Effect and Benefits of Colorado LLC Conversion

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

Conversion does not affect an LLC’s Employer Identification Number (EIN). A converted Colorado LLC remains the same entity with the same tax identity. A changed EIN, often necessary for other relocation methods, is inconvenient and can cause tax problems and organizational confusion.

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. Conversion does not change an LLC’s contractual rights and obligations. The converted Colorado LLC continues the business relationships it had in its former state. Existing contracts still hold legal force.

A Colorado LLC conversion does not formally terminate the LLC in the original state. Winding down, dissolution, and asset distribution are all unnecessary. Other strategies for changing an LLC’s charter state require winding down and dissolution, which are expensive and procedurally burdensome.

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. 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.

Notable legal effects of a Colorado LLC conversion include the following. Colorado law, the LLC’s new articles of organization, and the company’s operating agreement govern the post-conversion LLC. 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. A Colorado conversion does not affect an LLC’s assets or liabilities, and any existing contractual rights and obligations survive the conversion. 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.

A post-conversion Colorado LLC continues any lawsuits or other legal processes in which the LLC was involved before conversion. A Colorado LLC conversion does not affect ownership of the LLC unless the plan of conversion describes a change in ownership. A member who personally guaranteed company debts before conversion remains personally obligated for the same debts after conversion.

Conversion does not result in additional member liability for company debts. 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.

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.

Moving an LLC Out of Colorado

Colorado permits outbound LLC conversion under Colo. Rev. Stat. section 7-90-201(1)(b). A Colorado LLC can convert to another state’s jurisdiction, provided that the destination state also authorizes the procedure.

Colorado Outbound Conversion Requirements

A Colorado LLC that converts to another state must file a Statement of Conversion with the Colorado Secretary of State’s Business Organizations Office. The outbound filing must include a plan of conversion approved by the LLC’s members or managers. Colorado does not require a separate certificate of surrender. The Statement of Conversion completes the Colorado side of the transaction. The destination state will require its own formation and conversion (or domestication) documents.

Filing Fees for Moving an LLC from Colorado

The Colorado Secretary of State’s Business Organizations Office charges a filing fee of $50.00 for an outbound Statement of Conversion Converting a Domestic Entity into a Foreign Entity. The destination state will charge separate filing fees for its formation and conversion documents.

Colorado LLC Laws That Apply After the Move

The Colorado Limited Liability Company Act (Colo. Rev. Stat. sections 7-80-101 through 7-80-1101) imposes ongoing requirements on all domestic LLCs, including those formed through conversion from another state. An LLC that converts to Colorado becomes subject to these obligations immediately upon effectiveness of the conversion.

Colorado Periodic Report and Compliance Requirements

Colorado requires domestic LLCs to file a Periodic Report with the Colorado Secretary of State. The filing interval is annual, and the filing fee is $10.00. This efficient reporting requirement is one advantage of converting to Colorado, as the annual compliance burden is light compared to other states. An LLC that converts to Colorado and no longer has to file in the original state will avoid the time and expense of annual filings in multiple jurisdictions.

Colorado LLC Operating Agreement Requirements

Colorado refers to an LLC’s internal governance document as an Operating Agreement under Colo. Rev. Stat. section 7-80-102(11). The Operating Agreement governs the LLC’s internal affairs, including the rights and obligations of members and managers, profit distributions, and management structure. The Operating Agreement is not filed with the state; it is maintained by the LLC as a private document.

Colorado LLC Member and Manager Protections

Colorado codifies fiduciary duties of care and loyalty under Colo. Rev. Stat. section 7-80-404. The duty of care requires members and managers to act in good faith and with the care that a reasonably prudent person in a like position would use under similar circumstances.

The duty of loyalty requires members and managers to account to the LLC for any property, profit, or benefit derived by the member or manager in the conduct of the LLC business. An LLC’s operating agreement can modify, eliminate, or otherwise restrict members’ and managers’ fiduciary duties to the extent the operating agreement is not manifestly unreasonable.

Alternatives to Colorado LLC Conversion

When conversion is not available because the other state’s law does not allow it, a merger-based reorganization achieves the same result. The reorganization involves forming a new Colorado LLC and merging the out-of-state LLC into it, with the Colorado LLC as the surviving entity.

The surviving LLC succeeds to all property, contracts, and obligations of the original LLC by operation of law. For a detailed explanation of how the reorganization process works and its requirements, see our guide to LLC reorganization.

For a state-by-state comparison of LLC conversion and domestication laws across all states, see our guide to LLC domestication and conversion by state.

Post-Move Compliance and Ongoing Obligations

Once an LLC successfully converts to Colorado, the converted entity becomes subject to all Colorado-specific requirements for ongoing operations and compliance. Understanding these post-conversion obligations helps ensure the LLC maintains good standing with the Colorado Secretary of State and avoids administrative penalties.

A converted Colorado LLC must maintain a registered office in Colorado where service of process may be delivered. Unlike some states, Colorado does not require an LLC to appoint a formal registered agent. However, the LLC must ensure that someone can accept service at the registered office address.

Many LLC members and managers choose to hire a commercial registered office provider for this purpose, both to maintain privacy and to ensure consistent receipt of official communications. Commercial registered office services typically cost between $100 and $200 per year.

The converted LLC must also maintain compliant records of the conversion itself. The LLC should retain copies of the plan of conversion, the Colorado Statement of Conversion, the conversion documents filed with the prior state, the Colorado articles of organization, the Colorado operating agreement, and the resolution authorizing conversion. These documents demonstrate the LLC’s legal authority to conduct business and serve as proof of the entity’s continuing status as a Colorado LLC.

If the LLC’s business activities change after conversion, or if the state of Colorado becomes unable to accommodate the LLC’s primary business purpose, the company may need to amend its operating agreement or articles of organization. Amendments are filed with the Colorado Secretary of State and require a formal amendment document along with the applicable filing fee.

Outbound Information: Moving a Colorado LLC Elsewhere

A Colorado LLC may need to move to another state for many of the same reasons that an out-of-state LLC moves to Colorado: changed business location, tax optimization, or legal environment preference. The conversion process works in reverse for outbound moves.

The primary constraint is that the destination state must also allow conversion or domestication. If it does not, the Colorado LLC must use a merger-based reorganization instead. The LLC’s members and managers should verify the destination state’s requirements before preparing conversion documents.

After a successful outbound conversion, the Colorado LLC ceases to exist as a Colorado entity and becomes a domestic entity in the new state. The converted LLC typically remains subject to ongoing filing requirements in Colorado only if it continues to conduct business within the state. If the LLC no longer operates in Colorado and has no remaining connections to the state, it can avoid Colorado’s annual filing obligations by not maintaining a registered office or conducting business in Colorado.