INCORPORATE IN COLORADO ONLINE! OFFERING ASSISTANCE IN FORMING COLORADO CORPORATIONS, LIMITED LIABILITY COMPANIES
There are several issues that you should consider when determining the legal structure of your business. First, to what extent will you be personally at financial and legal risk? Second, who will have the controlling interest in the business? Third, how will the business be financed? There are advantages and disadvantages to each legal structure. As a new business entrepreneur, you should examine all the characteristics and determine which is best suited to your needs. In this section, you will find a wide selection of information for Colorado businesses, ranging from permits to start your Colorado business to information about filing your taxes with the state.
When incorporating in Colorado with Coddan, we not only file your articles of incorporation with the Colorado Secretary of State, but we also prepare customized bylaws and director resolutions. We can also obtain your Federal Tax ID Number (EIN) and provide other customized services for your Colorado corporation. When forming a new Colorado corporation, Coddan makes the process fast, easy, and affordable. Upon ordering, we will prepare and file the Articles of Incorporation on behalf of your company. When you choose us to incorporate in Colorado, your documents will be filed to the Secretary of State for expedited processing.
This section explains the procedure to incorporate in Colorado as well as post incorporation operations. There is a big difference between filing articles of incorporation and incorporating. The procedure to incorporate in Colorado is similar to the incorporation process in other states, but not identical. Listen, we are glad you inquired about our services regarding the formation and registration of a company in the State of Colorado. In our experience, the most tax advantageous type of company for Non Residents of the United States is the Limited Liability Company (in some Countries this is referred to as "Sociedad de Responsablidad Limitada"). Similar to a Sub Chapter S Corporation for Citizens of the U.S., in a Limited Liability Company, the earnings flow directly to the owners, thereby eliminating Corporate Income Taxes. A regular corporation would be subject to Federal Corporate Income Tax and State Corporate Income Tax. These combined rates can be as much as 40% of the Profits. How to Become a Company » Click Here for More Details | Colorado Aged Ready-Made Companies |
Our company is specialized in business incorporation in Delaware, California, Nevada and Colorado, etc. Form a Corporation, Non-Profit or LLC in New York, Colorado or Nevada. We may help you to incorporate in Washington, Florida, California or Oregon. Coddan offers online USA company start-up services, including Delaware corporations and assists businesses incorporating in Colorado. Provides rush filing options, name reservation and all incorporation filings needed to form your corporation or an LLC. If you would like to incorporate your business online or have questions about the benefits of online incorporation for your business, this site offers many additional resources for researching online incorporation. It is possible to retain nominee officers and directors for your Corporation or nominee members and nominee managers for LLC, who are then listed on the public records. Coddan offers corporate members and directors or nominees to ensure full service to clients. It is not necessary for the officers and directors to be USA residents, nor is it necessary for the officers to be directors of the company. Don't know which type of Entity to form? Call one of our specialists for a FREE CONSULTATION today! Call 0-207-060-0382 or you can chat with one of our reps live online.
Our Service Include
If you want to become familiar with the description and the contents of Colorado LLC formation packages, offered by Coddan and to find above, what kind of service is included in this or that Colorado companies incorporation package, to get an idea about the price of annual renewal of the service, and about the general legal requirements to the company incorporation within State of Colorado, please, select the package you need from the list, situated below the banner. The information in the banner will be renewed according to the package you've chosen. Colorado LLC Formation Package - £121.00! »Colorado LLC Formation Packages & Costs | (Price Includes Standard State Filing Fee)
With The Coddan, forming a company on the State of Colorado is a fast, easy and affordable process. We can help you through every step of the incorporation process. From choosing the plan that best fits the needs of your company, to acting as your Registered Agent, The Coddan is there to make the formation of your new company as quick and simple as possible. This enables you to focus your time on what matters the most, your business. Coddan provides helpful information and clarification as you form your corporation. There are many benefits that may result from Colorado incorporation, including important tax and additional financial advantages. As you plan your Colorado incorporation, you will need to consider Colorado corporation filing requirements, Colorado Articles of Incorporation, whether you will want to form a Colorado S corporation, and Colorado incorporation law. These issues are addressed in more detail as you complete your State of Colorado incorporation using the Colorado Incorporation Service. This includes relevant discussion of the following:
Name Clearance, Reservation and Registration Incorporation (or Formation) Qualification (or Registration) Amendments and Restatements Limited Liability Company Formation and Amendment Limited Partnership Formation, Amendment and Termination Mergers Annual Reports Dissolution, Cancellation and Withdrawal Assumed Business Name Mail Forwarding Service Obtain Employer Identification Number – EIN Application Form Preparation of Subchapter S Election Application Registered Office & Registered Agent Services Payroll and Tax Services Notary & Apostille Legalization Services The Benefits of Incorporating Your Business Comparison of Corporations Versus Other Business Structures Liability Issues and the Protection of Personal Assets Electronic Filing, time and Cost Saving Opportunities as You Form Your Colorado Corporation
Forming a corporation in Colorado? Forming a Colorado corporation can be a relatively simple process. Colorado corporation registration requirements are addressed in more detail by Coddan Incorporation Service. As you start a Colorado corporation you will want to make sure your Colorado incorporation forms are in order, that you meet Colorado corporation filing and registration requirements, in addition to state and local licensing requirements, and that you file for the appropriate tax information. Colorado Incorporation Package - £121.00! » Colorado LTD (INC) Company Registration Packages & Costs | (Price Includes Standard State Filing Fee)
Please note » The prices payable for the items that you order are clearly set out in the web site. There will be no contract of any kind between you and us unless and until we receive payment from you. We are not able to guarantee that any such filing will be acceptable to Secretary of State, nor are there any contractual obligation upon us to do so. If Secretary of State rejects incorporation or other electronic filing, we will credit your account with a full refund and the contract between us will be made void. Secretary of State does not offer a cancellation facility for the incorporation of companies or the electronic filing of documents. We will be unable to cancel any such submission on your behalf and will not refund any payment you have made. All prices shown at Coddan Web Site are in Great British pounds. Credit cards are the preferred method of payment; we accept VISA, MasterCard and Delta. We can accept payment in UK Pounds Sterling, US Dollars, Euros, Australian Dollars and Canadian Dollars.
Live Help » Live Help is a real time "chat" feature which enables you to interact with a customer service representative without a phone call. Get answers to your questions while using our website. Clicking the "Live Help" button will start an on-line session with one of our representatives. Live Help is currently available during normal business hours. Outside of the above opening hours our business center will be closed. When you click on the button you will see an e-mail form that will allow you to send us a mail with your questions. Live Help is absolutely free! There are no hidden fees. We offer the service as a courtesy to our website visitors. Dear visitors, while having a chat session with a customer, we are frequently requested to give a piece of advice on tax planning or business structuring. We would like to inform you that it is against our principles to provide online advice pertaining to these issues. The points that may be covered during a session include service description, package or service price, navigation at our website, ways of making an order, methods of payment etc. Yet, if you wish us to provide you with advice on tax or business structuring, you should be aware that this service is chargeable. If you have questions please E-Mail or call us: Call FREE 0800 081 1510, Overseas Residents: +44 845 020 4269 or +44 20 7060 0382, Fax: +44 20 7681 3318 or USA Toll Free: 1 877 557 5939.
1. Minimum Number of Incorporators - One or more. 2. Eligibility Requirements - None. 3. Duties - Delivering articles of incorporation to the Secretary of State for filing. 4. Listing Requirements - The name and address of each incorporator. 5. Corporate Purpose: Colorado allows a corporation to be formed for any lawful purpose(s). 6. Minimum Number of Directors - One or more. 7. Eligibility Requirements - The articles of incorporation or bylaws may list director qualifications. A director does not need to be a resident of this state or a shareholder of the corporation unless stated in the articles of incorporation or bylaws. 8. Listing Requirements - When incorporating in Colorado, directors are not required to be listed in the Articles. Either the articles or the bylaws may specify the number of directors. 9. Officers are not required to be listed in the articles of incorporation. 10. The articles must list the number of shares the corporation is authorized to issue, including certain information on classes and the par value of each share.
You probably found this page because you're looking into the process of Colorado corporation formation. While this is a complicated process, once you have a basic understanding of it, you can file for corporate status in under a week. There are a number of advantages to forming a Colorado corporation. This is one of the best ways to protect individual members from financial liability in the event of a lawsuit or other complications. When you form a corporation, your business becomes a separate legal entity. Incorporate in Colorado Online: Free Name Check For Your Colorado LLC or Corporation |
There are also tax incentives to Colorado corporation formation. If you file for a standard, or C corporation, you can write off things like employee health and dental benefits. In some cases, this formation allows business owners to be treated as employees. This is advantageous for programs like profit sharing, benefits, health care, pension plans and disability insurance.
Colorado corporation formation is a process that is reviewed by the Colorado Secretary of State. This office reviews your corporate information and assesses your validity as a business entity in the state. In many cases you will also need to apply for a tax identification number with the Internal Revenue Service. This number is necessary to open most corporate bank accounts. If you are operating a corporation from another state you will also need to find a registered agent. This is a person or company that is responsible for receiving correspondence and other material on behalf of the corporation. There are other additional requirements for complying with state business regulations.
There are a number of different reasons to incorporate Colorado businesses. You not only protect yourself from financial responsibility and legal liability, but you also receive several tax incentives as well. If you and your partners are in business together, Colorado corporation filing can protect you from having your personal bank accounts subject to lawsuits and other judgments against you. Nothing is worse than living in fear of a lean on your property and other assets.
When you incorporate Colorado businesses, you also protect yourself from your business partners' bad decisions. When you partners make mistakes in the name of the corporation, you are not held personally responsible for their errors. The corporation process is a way to create a separate entity for your business, and separates that entity from the members who make up the board of directors.
When you incorporate Colorado businesses, you also receive several tax incentives. For one thing, you can write off the costs of providing your employees with medical or dental insurance, and other benefit packages. These services are considered business expenses that can be deducted from your operating costs come tax season.
You will want to determine the type of corporation you want to set up. This is important because different types of corporations have different benefits. One consideration is the type of organizational structure you want to implement. Many times this consideration is dependent on the size of your business, and you goals for the future. You will also want to consider the type of stock options and investment opportunities you will want to present the general public and investment entities.
If you're thinking about reorganizing your business, you might want to form a Colorado LLC. You receive some of the benefits of Colorado corporation filing without being hit by the double taxation common in S corporations. Many Colorado corporations are subject to taxes on profits and additional taxes on dividends. This is not the case when you form a limited liability company.
If you form a Colorado LLC you will receive protection from personal liability for things like lawsuits ad other financial claims against the company. In an LLC, you do not issue stocks to raise funds, or revenue for capital investment. Instead, members are issued interest certificates that reflect the amount or share of their investment in the company. An LLC is run by the members, and the power vested in these members is determined by percentage of ownership.
You can form a Colorado LLC by filing with the office of the Secretary of State. In most cases this process is simple, and takes as little as a couple of days to complete. It's a good idea to consult with an attorney or other financial adviser before filing for this status. You may want to weigh the alternatives to determine which business structure meets the needs of your business, your customers and your partners.
As of 1994, you can form a Colorado LLC through the office of the Colorado Secretary of State. This is a relatively recent way to structure a business that helps to protect individuals from financial liability. An LLC, or limited liability company, is structured in a similar manner to traditional corporations.
All our Colorado LLCs are general trading companies which include search name availability for your Colorado LLC. Preparation and filing of Certificate of Formation with state office. Our incorporation service and State filing fees. Certified Copy of the Certificate of Organization. Colorado Resident Agent for 12 months. Registered Address in the State of Colorado for 12 months. Delivery Certified Copy of the Certificate of Formation is delivered as hard copy by post. The following documents will be delivered via E-Mail: a professionally-prepared 20 page Colorado LLC Operating Agreement ready-for-signature (Word. format). Minutes or Consents Documentation of Organizational Meeting.
THE FOLLOWING UPGRADES CAN BE ADDED TO THE ABOVE PACKAGE:
1. Nominee LLC Member for 12 months - £140.00 2. Nominee Operating Manger for 12 months - £140.00 3. Non-Standard Certificate of Organization (4-5 pages) - £60.00 4. Employer Identification Number (EIN) - £40.00 5. Domain Name Registration (.com or .us) for two years - £30.00 6. 888, 877, or 866 toll-free telephone numbers - £50.00 7. Apostilled Certificate of Good Standing - £125.00 8. Apostilled Certificate of Incorporation - £110.00 9. LLC Kit (seal is included) - £38.00
You can file for a Colorado LLC in just a matter of a couple of days. There are a number of restrictions and bylaws which you must agree to adhere to in order for your business to be granted LLC status. You can find specific information about the process online by searching the official website of the Secretary of State.
Many times forming a Colorado LLC allows you to receive some tax benefits that you cannot receive when you form a full-fledged corporation. It's important to weight the advantages and disadvantages with someone who you can trust. If you find the process overwhelming, you can hire a filing company to do the job for you. This is a great idea if you are filing out of state, or you find the process overwhelming.
If you live outside of the state of Colorado, or outside of the country, and you're thinking about filing for corporate status, you will need to find a Colorado registered agent. This is a person or company that is charged with accepting official documents and other correspondence on your behalf in your absence. You can personally employ someone to perform this task, or you can hire a filing company to do the job for you.
During the course of the fiscal year, the Colorado Secretary of State may need to contact you regarding all kinds of different business concerns. You will not be granted corporate status until you provide the name and address of your Colorado registered agent. This is a safety net required by the state to ensure that you run a responsible and ethical business in the state.
Many time business owners and board members choose to incorporate to protect their individual investments. If you're a business owner, you know how frightening it can be to face litigation from customers and business partners. When you form a corporation in Colorado, you protect you bank accounts and personal property from loss. In exchange for this security, you must provide a Colorado registered agent for the processing and servicing of all legal claims against the corporation. One of the best things you can do if you live outside the state of Colorado is assign a non-partisan registered agent. This provides you with the additional protection you may need when it comes to defending your business practices in a court of law. Many Colorado corporation filing companies offer this service for a nominal fee. This is a great way to take the worry out of official state business. Unlike a personal friend, or business partner, hired agents are paid to perform the simple task of receiving and forwarding all official business.
Starting a business is risky. Understanding the risks and reducing them through careful planning improves the chances for business success. You should be fully aware of the implications of owning your own business. A new business venture will affect both you and your family. Carefully analyze your reasons for starting a business. How will it fit with your family and your lifestyle? Ask yourself the following questions:
Am I a self-starter? Do I have the discipline to maintain a schedule? Do I want to earn more money? Will this business earn more money from the beginning or do I need to be prepared to initially work for less? Do I want to be more creative? Do I have the necessary skills to be successful in this business? Am I looking for more flexibility in my work and family schedule? Will this business allow me to work the schedule I desire? Am I ready for different challenges and adventures? Am I prepared to respond quickly to the needs of my business? Have I discussed this proposed business with my family? Do I have the money needed for business start-up and initial operating expenses until I start earning a profit?
There are typically three avenues available when going into business: starting a New Venture. Buying an Existing Business. Purchasing a Franchise. It is advisable to seek professional accounting and legal help before starting any business.
Starting a New Venture. A new start up is typically pursued when you have a unique idea that requires special equipment, specialized talents or a new way of doing things. A new venture may also be pursued when there is a customer base you can serve, or you are aware of an unfilled market need (e.g., there is not a dry cleaner within 12 square miles). The principal advantage of starting a new business is that you are in control of how you want your business to operate. There will be no negative history or track record to overcome. You will be able to provide your product or service the way you think it should be provided. The principal disadvantage is the need to start from scratch and to set everything up from square one. Factors you need to consider when forming a new venture include: legal structure, location, marketing and advertising, facilities, equipment, employees, taxes, a records system and capital.
Buying an Existing Business. Buying an existing business can have its advantages. By purchasing a business that is already established, you may eliminate some of the problems associated with starting a brand new business. However, when you acquire an existing business, you may also acquire its debts. Purchasing an existing business can be fairly complex. The following is a brief summary of some of the concerns of which you should be aware.
How successful is the business? How well known is the business? How loyal are the customers to the business? Is their loyalty based upon the current ownership? Do you know why the seller is selling the business? If the business has not been profitable, find out why. Do you have a plan to make it profitable? Does your purchase agreement include the sale of the business name? The property? The equipment and inventory? The debts? Be sure the exact terms of the sale are explained clearly, in writing, before you buy. Ask the seller about outstanding claims on inventory, equipment and fixtures. Whose responsibility will it be to settle these claims?
Tax Liabilities. If you purchase a retail business you may be liable for sales tax debts of the business. As a precaution, you should get a tax status letter from the Colorado Department of Revenue before buying. The tax status letter must be requested by the current owner using special form, submitted to the Colorado Secretary of State to the Colorado Secretary of State. Tax status letters may be requested on all state collected tax accounts including sales tax, wage withholding and corporate income tax accounts. There is a $10 charge for each tax requested. If you purchase a corporation or limited liability company, you may have the option of keeping the same sales tax account with the Colorado Department of Revenue. If you purchase a sole proprietorship or a partnership, you are required to open a new sales tax account.
When you purchase tangible property as part of a business, such as furniture, fixtures or equipment (new or used) for which you have not paid sales tax, you must pay a state use tax.
Many cities and counties also collect a use tax. All county use taxes and most city use taxes are collected by the state. "Home Rule" cities may collect use taxes directly. There may be additional liabilities for personal property taxes imposed by the county. Contact the local city clerk, the county assessor and/or the county treasurer's offices for more information regarding local use and personal property taxes.
All our Colorado companies are general trading companies which include search name availability for your Colorado Corporation. Preparation and filing of Certificate of Incorporation with state office. Our incorporation service and State filing fees. Certified Copy of the Certificate of Incorporation. Colorado Resident Agent for 12 months. Registered Address in the State of Colorado for 12 months. Delivery Certified Copy of the Certificate of Incorporation is delivered as hard copy by post. The following documents will be delivered via E-Mail: a professionally-prepared 20 page Colorado Corporation By-laws ready-for-signature (Word. format). Minutes or Consents Documentation of Organizational Meeting.
THE FOLLOWING UPGRADES CAN BE ADDED TO THE ABOVE PACKAGE:
1. Nominee Director service for 12 months - £140.00 2. Nominee Shareholder service for 12 months - £94.00 3. Non-Standard Certificate of Incorporation (4-5 pages) - £60.00 4. Employer Identification Number (EIN) - £40.00 5. Domain Name Registration (.com or .us) for two years - £30.00 6. 888, 877, or 866 toll-free telephone numbers - £50.00 7. Apostilled Certificate of Good Standing - £125.00 8. Apostilled Certificate of Incorporation - £110.00 9. Corporate Kit (seal is included) - £38.00
Except when purchasing the stock of an existing corporation and continuing the operations of that corporation, you must establish all new tax accounts when buying an existing business. The previous owner's sales tax licenses, state wage withholding and unemployment insurance accounts and federal employer identification numbers do NOT transfer to you, the new owner.
Purchasing a Franchise. Franchising offers a unique opportunity for individuals interested in operating a business. It allows you to both own and operate a business while drawing from the resources of the parent company. This arrangement may reduce some of the risks of going into business for yourself depending upon the quality and stability of the franchisor. While fewer than five percent of all franchised businesses fail annually, success is not guaranteed. You should not rush into franchising before completing a thorough investigation.
It should be noted that while a franchise is a method for going into business, it is NOT a form of legal structure. The franchisor - the business with the plan and structure - and the franchisee - you - are two completely separate businesses. You must each determine the appropriate form of legal structure for your own business.
LEGAL STRUCTURE & REGISTRATION
When you start your business, you must decide what legal structure it will have. There are several choices of business formats in Colorado including: Sole Proprietorship; General Partnership; Limited Partnership; Corporation; S Corporation; Limited Liability Company; Limited Liability Partnerships & Limited Liability Limited Partnerships; Limited Partnership Association.
There are several issues that you should consider when determining the legal form of your business. First, to what extent will you be personally at financial and legal risk? Second, who will have the controlling interest in the business? Third, how will the business be financed? There are advantages and disadvantages to each legal structure. As a new business entrepreneur, you should examine all the characteristics and determine which is best suited to your needs.
As you decide upon your legal structure, you should carefully evaluate both your present and future needs for operating your business. To avoid duplication of legal expenses, licensing and paperwork, analyze your various options and choose the business structure that will meet your long term needs rather than choosing a business structure solely for its short-term convenience. While it is not a requirement, it may be valuable to consult an attorney.
Colorado Sole Proprietorship. Sole Proprietorship is a business owned and operated by a single individual. There are few legal requirements to be met to establish a sole proprietorship. If an individual is operating the business under a name other than his/her own full first and last legal names, the business name must be registered as a trade name with the Colorado Department of Revenue. It is the most common form of legal structure for new small businesses.
Advantages. It is the least complicated form of legal structure. All profits and losses of the business are reported directly on the owner's personal income tax return. All decision making and control remains in the hands of the single owner. As a result, the owner is able to respond quickly to business challenges and opportunities.
Disadvantages. The primary disadvantage of a Colorado sole proprietorship is that the proprietor is personally responsible for all the business liabilities and debts. If the business is unable to meet its financial obligations, creditors may pursue the personal assets of the owner. The sole proprietor is generally limited to financing the business by using his/her own assets and/or borrowing money. Borrowing money will require periodic loan payments regardless of whether the business is making money. Therefore, the fact that the owner's personal assets are at risk is an important factor.
If you and your spouse run your business together and share in the profits, your business may be considered a partnership. You should record your respective shares of partnership income or loss separately for self-employment taxes. Doing this may or may not increase your total tax. It will ensure that each spouse receives credit for social security earnings on which retirement benefits are based.
Colorado General Partnership. General Partnership is a business owned by two or more individuals or other business entities. Although it is not required, it is strongly recommended that a general partnership prepare a written partnership agreement that outlines the business' structure and each partner's responsibilities. If the partnership owns real property, the partnership agreement should be filed in the county where the property is located with the office that keeps real estate records. Otherwise, there is no requirement to file the agreement with any state or federal agency. If the partners are operating the business under a name other than their own legal names, the business name must be registered as a trade name with the Colorado Department of Revenue.
Advantages. Colorado Partnerships have few legal requirements for formation. Partnerships are able to pool the financial, professional and managerial talents and resources of two or more individuals. A partnership is financed through the capital contributions of the partners and by borrowing money. The profits and losses of the business are reported annually on federal and state partnership returns. However, there are no partnership taxes. The partners are individually responsible for the taxes on their personal income tax returns. Profits and losses may be divided among the partners in whatever manner determined by the partners.
Disadvantages. The partners in a general partnership are personally liable for all business debts. Even if the partnership agreement specifies a defined split in profits, each partner is 100 percent responsible for all liabilities and debts. The personal assets of any one or all of the partners may be attached to cover the partnership's liabilities, regardless of which partner incurred the liability or debt.
Colorado Limited Partnership. A Limited Partnership is a business owned by two or more individuals or other business entities in which at least one of the partners has limited liability protection. There must be at least one general partner who remains personally responsible for all the partnership's liabilities. Limited partnerships are created by filing a Certificate of Limited Partnership with the Colorado Secretary of State.
Advantages. A limited partner's risk is limited to his/her financial - cash or property - investment in the business. The general partner(s) can retain personal control of the business while increasing the financial resources available to the businesses without incurring long-term debt. A Colorado limited partnership may raise capital by selling additional limited partnership interests in the business.
Disadvantages. The general partner(s) remain(s) personally responsible for all the liabilities and debts of the business. The limited partner(s) may not work in the business or participate in management without risking loss of limited liability status.
Colorado Corporation. A corporation is a legal entity that exists separately from the people who create it. A corporation is owned by its shareholders and run by a board of directors elected by the shareholders. In a large corporation, the directors hire corporate officers to manage the day to day operations of the business. In a small corporation, the directors and the corporate officers are usually the same individual(s). Corporations are created by filing Article of Organization with the Colorado Secretary of State and by adopting bylaws. There are certain formalities a corporation must adhere to, including:
Procedures for annual shareholder meetings. The election of the board of directors. Maintenance of corporate records. Adoption of bylaws. Complete separation of personal and business finances, and proper filings with the Secretary of State. Although many of the requirements may seem unnecessary for a small corporation, they are important to preserve the corporate form.
Advantages. A Colorado corporation is a legal entity separate from the owners. It is like a person with a life of its own. This creates a wall of separation which normally limits a stockholder's liability to the amount of investment in the corporation. If an owner dies or wishes to sell his/her interest, the corporation continues to exist and do business. This adds stability to its existence. Once a corporation has been established through the Secretary of State, no other business may register with the Secretary of State using the same name.
Disadvantages. While a Colorado corporation limits an owner's liability, the owner(s) and/or the corporate officers may still be held responsible if the "corporate veil" has been pierced. The "corporate veil" can be pierced in a number of ways, primarily by the personal actions or guarantee of an owner. Corporate profits may be subject to double taxation. A corporation must pay tax on income as a separate legal entity. If profits are distributed to shareholders, they are also subject to taxation as part of the individual shareholder's income. A shareholder who is a working officer in the corporation is considered to be an employee and must be paid a "reasonable wage" subject to state and federal payroll taxes. If dividends are paid in lieu of wages, the entire dividend is subject to payroll taxes.
Colorado S Corporation. An S Corporation is not a separate form of legal structure, but rather a special tax status granted by federal tax law to a corporation to tax the business' income like a partnership or a sole proprietorship. A corporation elects S Corporation status by filing with the IRS on Form 2553 "Election by a Small Business Corporation".
Generally, the election must be filed within 75 days of incorporating. Otherwise, a corporation may not change its status until the beginning of each new calendar year. Form 2553 must to be filed by March 15th to be effective for the new tax year. Once elected, S Corporation status will continue until the shareholders revoke the choice or a corporation no longer meets the qualifications.
Advantages. An S Corporation has all the general advantages of "regular" corporations except it does not pay corporate income taxes. It divides the expenses and income among its shareholders. Individual shareholders report profits and losses on their personal income tax returns.
Disadvantages. To apply for S Corporation status the business must comply with the following restrictions: it must be a domestic corporation. It cannot be a financial institution using the reserve method of accounting for bad debts, an insurance company, a corporation that takes tax credits for doing business in a U.S. possession, or be a domestic international sales corporation (DISC). It may only have one class of stock issued and outstanding. It may not have accumulated earnings and profits at the close of each 3 consecutive taxable years if 25 percent of its gross receipts for each of the years are passive investment income. Passive investment income includes royalties, rents, dividends, interest, annuities, and sales or exchanges of stocks or securities. It may have a maximum of 75 shareholders. It may not have as a shareholder any person who is not an individual except certain qualifying trusts or certain qualifying exempt organizations. Shareholders must be US citizens or resident aliens. It must have a tax year ending December 31. All shareholders must agree to elect S Corporation status.
While an S Corporation is not subject to double taxation as a regular corporation, it loses the ability to deduct the full cost of medical insurance as a business expense under current tax law. Corporate officers are still treated as employees. There are also differences in how business losses are carried forward which may be positive or negative depending upon the individual situation. A competent tax advisor should be consulted before applying for S Corporation tax status. It is important to note that the corporation must file the Articles of Incorporation with the Secretary of State before it can apply to the IRS for S Corporation status.
Colorado Limited Liability Company. A Limited Liability Company (LLC) is a relatively new form of business structure. The Colorado Limited Liability Company Act was adopted in 1990. An LLC combines the concepts of partnerships for tax purposes and corporations for liability purposes. LLCs are created by filing Articles of Organization with the Colorado Secretary of State. While similar, LLCs are NOT corporations. In an LLC, the owners are called members. The members may elect or hire a manager(s) to run the business. As in a corporation, the owner(s)/member(s) may elect themselves to be the manager(s).
Advantages. Members of an LLC are protected from personal liability in the same way as corporation shareholders, while the entity itself can have the flexability of a partnership. The IRS has determined that LLCs may elect to be treated as partnerships or corporations for income tax purposes. A Colorado LLC will be treated as a partnership if there are two or more owners, unless the LLC elects to be taxed as a corporation. However, state law allows the formation of an LLC by a single individual. In that case the IRS will treat the LLC as a sole proprietorship. Because LLCs are a new form of legal structure and various questions remain unanswered, it is recommended that you consult a knowledgeable attorney if considering the formation of an LLC.
Disadvantages. Colorado LLCs are a recognized legal structure in all states. However, tax and liability treatment of an LLC is not uniform across state lines. There may also be limitations on the transferability of ownership in certain situations. In that case the IRS may treat the LLC as a sole proprietorship.
Colorado Limited Liability Partnerships & Limited Liability Limited Partnerships. The Limited Liability Limited Partnership Act became law July 1, 1995. The intent of the law is to create a form of legal structure which is similar to S Corporations and Limited Liability Companies. Registered Limited Liability Partnerships (LLP) and Registered Limited Liability Limited Partnerships (LLLP) limit a partner's personal liability in the business to their personal investment in the business, except in areas related to their personal professional conduct. LLPs and LLLPs will usually be taxed as partnerships but may elect to be taxed as corporations. Both entities are created by filing a Registration Statement with the Colorado Secretary of State. The partners in Colorado LLPs and LLLPs are directly considered the operators of the business. There is no election of officers or managers as in corporations or LLCs.
Advantages. New businesses and existing general partnerships (currently registered with the Colorado Department of Revenue) may register as a Registered Limited Liability Partnership. Existing limited partnerships (currently registered with the Colorado Secretary of State) may register as a Registered Limited Liability Limited Partnership and gain liability protection for all partners without a complete reorganization of the business. The liability protection is similar to the protection provided to the owners of a corporation. Once an LLP or LLLP has been registered with the Colorado Secretary of State, no other business may register with the Colorado Secretary of State using the same name. The intent of the law is to gain the benefits of the partnership form of business while limiting the personal liability of the owners.
Disadvantages. LLPs are primarily for businesses where all the owners belong to a single licensed profession, e.g. CPAs, attorneys, doctors, etc. It is a new form of legal structure and it is not a recognized form of legal structure in all states. Anyone considering the formation of a LLP or a LLLP should consult a knowledgeable attorney.
Colorado Limited Partnership Association. The Colorado Limited Partnership Association Act created the new form of legal structure called the Limited Partnership Association (LPA) and became law on July 1, 1995. This new entity is created by filing Articles of Association with the Colorado Secretary of State.
Advantages. The main difference between a limited partnership association and a partnership or limited liability partnership is that the association has an indefinite life. Its existence terminates upon the affirmative vote of all of its members or as otherwise provided in the bylaws and by filing articles of dissolution with the Colorado Secretary of State. The association's existence does not terminate upon the disassociation, death or bankruptcy of a partner. Under the Act, LLCs may convert to LPAs in the same fashion that they could convert to partnerships or limited partnerships under the Limited Liability Company Act.
Disadvantages. LPAs must have two or more persons as members of the business. This structure is very new and at this time there are few interpretive guidelines.
INCOME AND PROPERTY TAX
Colorado Corporations. If your business is a corporation located or "doing business" in Colorado, it is subject to state and federal corporate income taxes. In general, a corporation will be considered to be "doing business" when it has employees or business property in Colorado. If you will be filing as an S Corporation, your business income will be taxed as a partnership and will be exempt from corporate income taxes, although a corporate income tax return must still be filed. Working corporate officers are still treated as employees, even in an S Corporation, and must be paid a reasonable wage which is subject to all payroll taxes. At the end of your corporation's fiscal year, you must figure its net taxable income or net loss. To do this, you subtract the operating expenses and "allowable deductions" from the gross income. The laws governing federal tax rates, allowable deductions and losses change frequently. Annually, you should obtain from the IRS a summary of the current applicable federal tax laws.
Every corporation, including S Corporations, "doing business" in Colorado or deriving income from Colorado sources must file a corporate income tax return with Colorado. Colorado taxable income is determined by adding and/or subtracting various adjustments to your federal taxable income. If your corporation is "doing business" in Colorado as well as other states, you must apportion to Colorado the portion of your income derived from sources within Colorado. There are two methods that may be used to determine state corporate income tax. If you expect your federal tax liability to be $500 or more and/or your state tax liability to be $5,000 or more, you are now required to file and pay estimated taxes during the year/ A corporation that owes more than $500 (and no estimated tax payments equal to the smaller of current year's or prior year's taxes) in federal income tax or $5,000 in state income tax may be subject to penalties and interest. If you receive dividends from your corporation you must report them as income on your personal income tax return and pay the appropriate income taxes.
Colorado Partnerships & Limited Liability Companies. If your business is a general partnership, limited partnership, limited liability company, limited liability partnership, limited liability limited partnership or a limited partnership association, you must file state and federal partnership income tax returns. The partnership business is not required to pay income tax. The state and federal partnership income tax returns are used to report your business' income and expenses, changes in your balance sheet and how the partners share profits and losses. Each partner in the partnership is then responsible for his/her own income and self-employment taxes as an individual. If you expect to owe the IRS more than $500 in individual federal taxes, you must make federal estimated tax payments using form 1040-ES. If you expect to owe Colorado more than $1,000 in individual state taxes, you must pay state estimated tax payments. Estimated payments are made using the Colorado Form 104-EP. If you and your spouse run your business together and share in the profits, your business may be considered a partnership. You should record your respective shares of partnership income or loss separately for self-employment taxes. Doing this will usually not increase your total tax, but will give each spouse credit for social security earnings on which retirement benefits are based.
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