Operating Agreement LLC Colorado

A Colorado Operating Agreement is a legal document outlining how a Limited Liability Company (LLC) is owned and managed. It defines members’ roles, ownership percentages, and decision-making rules. Both single-member and multi-member LLCs are encouraged to create one, even though it is not required by law.

Is a Colorado Operating Agreement Required?

No. Under Colorado Revised Statutes § 7-80-102, an Operating Agreement means any agreement among members on company affairs and does not have to be in writing. The Colorado Secretary of State (CSOS) does not require it to be filed—it is kept as an internal record. Still, a written Operating Agreement is recommended for legal protection and organizational clarity.

Types of Operating Agreements

• Member-Managed LLC: All members share control and can bind the business to contracts. This is the default structure.
• Manager-Managed LLC: Members appoint managers to handle daily operations. Members act mainly as investors and approve only major decisions.

Key Provisions

A solid Operating Agreement typically covers:

• Basic Information: LLC name, purpose, duration, and registered agent.
• Ownership & Capital Contributions: Member names, ownership shares, and invested funds or assets.
• Management & Voting: How decisions are made and voting rights are distributed.
• Distributions: How profits and losses are shared.
• Membership Changes: Rules for adding or removing members.
• Dissolution: How the company’s assets and debts are handled if it closes.
• Tax Status: Federal tax election (e.g., sole proprietorship, partnership, S-corp). Colorado LLCs cannot be taxed as Qualified Joint Ventures since the state is not community property.

Why It Matters

• Protects limited liability: Confirms separation between business and personal assets.
• Prevents disputes: Sets clear rules to avoid relying on default state laws.
• Builds credibility: Banks and lenders often request a copy before approving accounts or credit.