Colorado LLC Operating Agreement
Protect Your LLC
with an Operating Agreement
An operating agreement is essential for every Colorado LLC because it provides clear guidelines on ownership and management structure, protects your limited liability status, and allows you to customize your business operations.
There’s no need to risk running your LLC without the protection of an Operating Agreement. Get one for free using our template and create a free account to save your work. Or, use our guide below to write your own.
Free Colorado LLC Operating Agreement Template
Use our attorney-drafted template below to create your own Colorado LLC Operating Agreement. When you finish entering in your LLC’s information, you can download it and print it out for free. No tricks, no strings attached!
Don’t have time to finish it now? You can save your progress and return to finish it later. If you would rather have us handle all your LLC formation and operations paperwork, you can hire us at any time.
This template is for Single-Member LLCs, but we also offer free Multi-Member LLC Operating Agreements crafted to suit the needs of your business. When you hire us to form your Colorado LLC, or become your Colorado registered agent, you’ll receive a customized Operating Agreement that conforms to your company’s specific management needs.
Why Do I Need an Operating Agreement?
The State of Colorado does not require your LLC to have an Operating Agreement, but that doesn’t mean you shouldn’t have one. A well-written Operating Agreement acts as a foundation on which you can build a solid understanding of your LLC’s management structure, financial protections and processes, and ownership rights:
Clear Ownership and Management Structure
An Operating Agreement outlines who owns your LLC, the rights and responsibilities of all members, and how members/owners divide up assets and money if one decides to leave or if new members are allowed to join.
Having this structure down in print with member signatures agreeing to the terms does wonders for preventing or resolving disputes over decision-making rights or financial disagreements.
Protection of Limited Liability Status
An Operating Agreement strengthens the separation between the owners and the business entity. It acts like an extra shield, protecting your personal assets from any business debts or legal claims.
Without one, your business would covered under Colorado’s default laws during a dispute, which may not agree with your business preferences or goals.
Business Operations Customized for Your Business Needs
An Operating Agreement allows all members/owners to outline the rules and responsibilities for managers, money distribution, how members are added or removed, and what their rights are for making changes as the company grows.
With these processes written down and agreed to by all, everyone in your company can move forward with confidence knowing what their obligations are and that their investment is protected.
Topics Every Operating Agreement Should Cover
There are many different topics an Operating Agreement could include, but there are some basics that each one should cover. Whether you choose to write your own, hire a lawyer, or use a template you find online, make sure the Operating Agreement you get includes the topics below:
LLC Organization
- Organization addresses the details of company creation. It covers the company name, start date, initial members/owner names, and the structure of ownership. If there are multiple members, they may all have equal ownership or different percentages of ownership.
Management Structure & Member Rights
- This section of your Operating Agreement describes how your LLC is managed. Your company could be managed by members or by managers appointed by the members. This section also covers the rights and responsibilities of each member or manager.
Capital Contributions
- The money and other assets that members provide to start the LLC are called capital contributions. Your agreement should note each member’s contributions and their percentage of ownership interest.
Distributions
- This section outlines how profits and losses are distributed among the LLC members. This includes assests won or lost, money, or any other type of business assets.
Changes in Membership or to the LLC in General
- Deciding how members will join and leave your company is important to have down in writing before it happens. It is also good to decide if members can transfer their percentage of ownership if they pass away, declare bankruptcy, get a divorce, or wants to be bought out. Also, this section will outline how Amendments to the agreement are made. This includes approval procedures and voting terms (unanimous vs. simple majority?).
Closing or Dissolving the LLC
- Your Operating Agreement should also have a section explaining what will happen to company shares, assets, and money if the LLC closes or dissolves. In Colorado, this is referred to as “winding up” the business. The “winding up” process starts with the business ceasing all business operations and includes paying debts and distributing assets amongst the members.
There are many other kinds of clauses and sections an LLC Operating Agreement can have. For example, the Operating Agreement we provide includes a Banking Resolution statement you can use when you open a business bank account.
Why risk running your LLC without one? Keep member disagreements and other headaches at bay with our free professionally drafted Colorado LLC Operating Agreement.
Will a Single-Member LLC Need an Operating Agreement?
Yes, even single-member LLCs need an Operating Agreement. If you are the only member of your LLC, the Operating Agreement serves as a boundary keeper between you and your entity. Here are more reasons why single-member LLCs should still write an Operating Agreement:
Protects Limited Liability Status
An Operating Agreement demonstrates that your LLC is a separate entity from yourself. Establishing this boundary between you and your entity is critical for protecting your personal assets from lawsuits or business debts.
Establishes Business Legitimacy
Your Operating Agreement is a private, internal business document, but that doesn’t mean other institutions won’t want a peak at it. Banks, lenders, or investors in your company will want to see your Operating Agreement before they will open a business account, offer lines of credit, or provide financing. Having a well written agreement shows that your business is structurally sound and professional.
Presents Clear Business Rules
Your LLC may be a “one person show” for now, but in the future when your business grows, you may need to take on partners. Or, if the worst should happen and you need to step away from the company, you will need a clear way to transfer ownership. Your Operating Agreement can outline how new members are added, what happens to assets and funds when someone leaves, and steps to take if you should pass away or close the company. With the rules for these processes established, legal complications can be avoided for everyone involved.
How Do I Make Changes to My Operating Agreement?
As your business grows and changes, it’s a good idea to keep your Operating Agreement current by making amendments. You and the other members of the LLC can make amendments at any time by following the rules already outlined in the original agreement. Below are the five most common steps in the Operating Agreement amendment process:
- Review the amendment process outlined in the original document – make sure you are following the specific requirements, such as approval policies and voting requirements (if applicable)
- Write the amendment – be as detailed as possible when describing the changes you want to make. The clearer you word the amendment, the better it will help you avoid disputes in the future.
- Get member approval – If you manage your LLC with other members, you must follow the voting process outlined in the original agreement (e.g., unanimous consent needed or just a majority?). For single-member LLCs, you can of course sign and approve it yourself. However, it’s still a good idea to have an amendment document formally created and stored to track the history of changes to your LLC.
- Sign & store the amendment with your original Operating Agreement – it’s important not to alter the orginal agreement document. Just add the amendment to it in the appropriate place. All members need to sign and date the amendment to make it legally binding.
- Notify other entities (optional) – If the amendment you’ve made affects a contract you have with investors, banks, or other entities, you will need to let them know. Otherwise, the changes you make to your Operating Agreement are your business only and do not need to be shared with anyone.
Making amendments to your Operating Agreement is always free if you write them yourself, though many choose to consult with their attorney or accountant. However you choose to amend this document, it remains a private and internal business affair that need never be shared with the state.
CO LLC Operating Agreement FAQ
Still have questions? Check out our FAQ section below, or give us a call and speak to one of our local business experts.
Yes, you can absolutely write your own Operating Agreement. We don’t recommend this path unless you have legal writing experience as there are many important legal issues to address in this kind of document. However, if you’re willing to put in the time and the research, it can be done.
No, your Operating Agreement is not filed with the state. Operating Agreements are what’s called an “internal business document.” This means you keep it to yourself, shared only among members of your LLC, unless a bank or other agency asks to see it. The state only wants to have your LLC Articles of Organization and Periodic Reports on file.
No, your Operating Agreement does not need to be notarized. You can choose to have it notarized, but it is not necessary to make it a legally binding document.
Yes, your LLC Operating Agreement is a legally binding document as long as everyone who signs it does so willingly and is over the age of 18.
If you lose your Operating Agreement, don’t panic! If you’re a Single-Member LLC, you can make another one to sign and date. If you are part of a Multi-Member LLC, check with the other members to see if they have a copy you can duplicate. If you are in a legal disagreement with the other member(s), you will need to get your lawyer to subpoena a copy from them. Any new Operating Agreement you make will override the original, even if you find it afterwards.
To avoid the risk of losing your Operating Agreement, try to have a digital copy stored someplace safe. Or, open an account with us and let us store your Operating Agreement in your online account. From there, you can download or print it out anytime you need it.
