Does Colorado Require an LLC Operating Agreement?

Colorado does not require an LLC to have an operating agreement. You can form and run a Colorado LLC without one, and the statute defines an operating agreement broadly enough that it does not even have to be in writing.¹ Skipping one is still a mistake for most businesses. Without an agreement, every gap in your LLC’s governance gets filled by the default rules in the Colorado Limited Liability Company Act, and those defaults rarely match what members actually intended.²

What the Default Rules Do If You Skip One

The statute controls wherever your operating agreement is silent, which, if you have no agreement at all, is everywhere.² A few of those defaults tend to catch owners off guard.

Profits and losses split by contribution value. Colorado allocates profits and losses based on the value of each member’s contributions as recorded in the company’s books, not by any ownership percentage the members talked about or the work each one puts in.³ If one member put in $80,000 and the other put in $20,000, profits split 80/20 by default even if both members assumed they were equal partners.

Unanimous consent for anything out of the ordinary. Day-to-day decisions go by majority vote of the members, or of the managers in a manager-managed LLC. But any action outside the ordinary course of business, plus any amendment to the articles of organization or to the operating agreement itself, requires the consent of every single member.⁴ One member who disagrees can block moves like taking on a new line of business or admitting an investor.

Transfers only pass the money, not the vote. A member can assign their interest, but the person receiving it gets only the right to distributions. They cannot participate in management or become a full member unless the other members allow it.⁵ A departing member’s successor can end up with a share of the money but no say in the business.

Dissolution has few built-in exits. Under the default rules, the LLC dissolves when all members agree, when an event specified in the operating agreement occurs, or when the company has no members for 91 consecutive days.⁶ Without an agreement that lays out triggering events or buyout procedures, a serious dispute between members has no built-in resolution short of unanimous agreement to dissolve or a lawsuit.

Why It’s Still Worth Having One

An operating agreement lets you replace any of those defaults with terms that fit your business. The statute is explicit that the operating agreement controls over conflicting statutory provisions, and you can adopt one before, at the time of, or after filing your articles of organization.² There is no filing deadline. Writing one before you start operating just saves you from arguing about rules while you are still trying to build the business.

Liability protection is the other reason. Colorado courts weigh several factors when deciding whether to pierce the veil and hold members personally liable for business debts, including whether the company operates as a distinct entity, whether personal and business funds are kept separate, whether adequate records are maintained, and whether members disregard legal formalities. A well-drafted operating agreement addresses most of those factors directly by establishing formal procedures that keep the business visibly separate from its owners. An LLC with no agreement looks, to a court, like a business that has not bothered to distinguish itself from its owners.

Banks and lenders also routinely ask to see an operating agreement before opening a business account or extending credit. Without one, basic operations can stall over administrative objections.

Single-Member LLCs Need One Too

Colorado’s statute specifically contemplates single-member operating agreements. For a sole-owner LLC, the agreement can be a signed writing about the company’s affairs, a written agreement between the member and the company, or even an unwritten agreement if the LLC has a separate manager.¹

The veil-piercing risk is actually higher for single-member LLCs because the line between personal and business activity blurs easily. A written agreement that spells out how business funds are handled, how the member takes distributions, and what happens if the member dies or becomes incapacitated creates a paper trail showing the LLC is a real, separate entity. It also provides instructions for transferring the business if something happens to you, which keeps the LLC from dissolving automatically after 91 days with no members.⁶

What to Put in a Colorado Operating Agreement

Colorado gives you wide latitude. The statute allows any provisions about the LLC’s affairs and business conduct that are consistent with law.² At a minimum, cover the following.

Member contributions. Specify what each member contributed at formation, whether cash, property, or services. Because the default profit split keys off contribution values, getting these numbers on paper correctly is critical.³
Profit and loss allocation. If you want profits divided differently from the ratio of contributions, say so in writing.
Management structure. State whether the LLC is member-managed or manager-managed and describe each person’s authority. Under Colorado law, this designation affects who can bind the company in business transactions.⁷
Voting and decision-making. You can set voting per capita, by ownership percentage, or any other method. Decide which decisions take a simple majority, a supermajority, or unanimous consent. Replacing the default unanimous-consent rule for extraordinary actions is one of the most practical things you can do to prevent deadlocks.⁸
Transfer restrictions. Set the process for selling or assigning membership interests, including rights of first refusal and the conditions for admitting new members. Without these provisions, a member can transfer the economic interest freely but the transferee gets no management rights.⁵
Capital calls. If the business needs more funding later, describe how capital calls work and what happens to a member who does not participate. Common approaches include diluting the non-participating member’s ownership or treating the extra contributions as a loan to the company.
Dissolution and winding up. Spell out the events that trigger dissolution, how assets get distributed, and how debts are settled. This avoids relying on the default rule that dissolution requires unanimous agreement.⁶

Fiduciary Duties You Can Tailor

Colorado imposes fiduciary duties on members who manage the LLC and on appointed managers. The duty of loyalty requires them to account for any property or profit derived from the business, avoid conflicts of interest, and refrain from competing with the LLC before dissolution. The duty of care requires them to avoid grossly negligent or reckless conduct, intentional misconduct, and knowing violations of law. Both carry an overarching obligation of good faith and fair dealing.⁹

Your operating agreement can clarify how those duties apply in practice. If a member also runs a separate business in a related industry, for example, the agreement can carve that activity out from the default prohibition on competition. Getting these understandings in writing before a dispute arises prevents expensive litigation over whether someone breached a duty no one discussed at the outset.

Signing, Filing, and Amending

All members should review and sign the operating agreement. Colorado does not require it to be in writing, but putting it on paper and getting signatures eliminates ambiguity about what was agreed.¹ The agreement can take effect as early as the LLC’s formation date even if the members sign it later.²

The operating agreement is an internal document. You do not file it with the Colorado Secretary of State. Keep the signed agreement with your company records alongside the articles of organization, member ledgers, and financial statements. Having it accessible matters if a bank, a potential investor, or a court ever asks to see it.

One last point about the agreement itself: amending it requires the consent of every member under the default rules.⁴ If you want a lower threshold, build it into the original agreement. Many LLCs allow amendments by a two-thirds or simple majority vote so a single holdout cannot freeze the company’s governance.

1
FindLaw. Colorado Code 7-80-102 – Definitions
2
Justia. Colorado Code 7-80-108 – Effect of Operating Agreement – Nonwaivable Provisions – Statute of Frauds
3
Colorado.Public.Law. Colorado Code 7-80-503 – Sharing of Profits and Losses
4
Justia. Colorado Code 7-80-401 – Management of Limited Liability Company
5
Justia. Colorado Code 7-80-702 – Assignment of Limited Liability Company Interest
6
Justia. Colorado Code 7-80-801 – Dissolution
7
Justia. Colorado Code 7-80-405 – Members and Managers as Agents
8
Justia. Colorado Code 7-80-706 – Voting
9
FindLaw. Colorado Code 7-80-404 – Duties