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Colorado s corporation

When starting your own business, you might hear about the benefits of an S Corporation (S Corp). In general, the S Corporation isn’t a business structure but rather a method of business taxation approved by the internal revenue service (IRS). If you’re curious about forming a Colorado S Corp, you’re in the right place.

Start an S Corp in Colorado

How to Set Up an S Corporation in Colorado

Colorado doesn’t register S Corps. Instead, Colorado taxes a business based on its IRS election. To form an S Corp in Colorado, you’ll need to elect S Corp taxation by filing Form 2553, Election by a Small Business Corporation, with the IRS. Therefore, setting up an S Corp in Colorado begins with forming a corporation or LLC.

1. Choose a Business Name 

Your business name must be unique from all other Colorado-registered business entities. A corporation’s name should contain the term or abbreviation “corporation,” “incorporated,” “company,” “limited,” “corp.,” “inc.,” “co.,” or “ltd.”

LLCs should include the term or abbreviation “limited liability partnership,” “registered limited liability partnership,” “limited,” “llp,” “l.l.p.,” “rllp,” “r.l.l.p.,” or “ltd.” Once you’ve chosen a name, you can file with the Secretary of State to reserve it for a (renewable) 120 day period.

We offer a Name Reservation Service that will complete a search for any similar names and file the paperwork for you.

2. Appoint a Registered Agent in Colorado

Your statutory agent or “registered agent” is the person who will receive service of process and other legal notices on behalf of the company. The company may be its own registered agent, or you may choose another individual or business created for this purpose. Whoever you choose must have a usual place of business in Colorado.

You can use our Registered Agent Service to connect you with a registered agent in your area.

3. Choose a Director or Managers 

Your corporate directors or LLC managers (or members, if member-managed) will make governing decisions for the business. 

4. File Articles of Incorporation/Organization with the Colorado Secretary of State

Before you can legally do business in Colorado, you must register your business with the Secretary of State. To form a corporation, you’ll file Articles of Incorporation, containing the name and address of the business, its registered agent, each incorporator, and the initial number of shares. To form an LLC, you’ll file Articles of Organization with the name and address of the business, its registered agent, each forming member, and each manager.

5. File Form 2553 to Turn Business into an S Corporation

Once you’ve registered with the Secretary of State, the final step to creating an S Corp is to make the S Corp election with the IRS. Before you can make this election you need to obtain an Employer Identification Number, or EIN. You can do this by either going directly to the IRS website or by using our fast and convenient EIN filing services. Corporations only need to file Form 2553 to alert the IRS of their election. LLCs first need to elect to be taxed as a corporation with Form 8832, then file Form 2553.

What to know before creating an S Corporation in Colorado

The IRS taxes each entity type based on the default rules unless you elect otherwise. By default, a corporation is a “C Corp.” Corporations must pay corporate income taxes, in addition to withholding taxes from their employee’s wages. LLCs are taxed by default as sole proprietorships (one member) or partnerships (multiple members).

Known as “pass-through entities,” these businesses don’t pay corporate income taxes. Instead, the business owners pay taxes on the business’s profits and losses on their individual tax returns in addition to self-employment taxes. The S Corp is a pass-through entity.

To qualify to elect S corporation status, your business must meet the following requirements:

If your business qualifies to be an S Corp, you must file Form 2553 with the IRS to make the election. The IRS can accept or deny your election. You should file Form 2553 within two months and 15 days after the beginning of the tax year you want to have S Corp status or during the tax year preceding the tax year you want to have S Corp status.

Can LLCs choose an S Corporation election? 

Yes, LLCs can make an S Corp election. S Corp status doesn’t change your business structure. Instead, the S Corp election benefits the business owner’s tax liability. When you elect S Corp taxation, the members will be taxed on their salary, allowing them to avoid the self-employment tax. For more information on LLC taxation, visit our page with Tax Info for LLCs.

Weighing the pros and cons of creating an S Corporation

Starting an S Corp in Colorado is a choice for you to make based on your unique circumstances. It changes your tax filing requirements and may not always be the best choice for your business.

Pros of an S Corporation

When you create an S Corp, you gain the asset protection of an LLC or corporation. The S Corp election allows pass-through taxation (rather than taxation at the corporate level) and tax-favorable characterization of income. Finally, an S Corp can use the cash method of accounting.

Cons of an S Corporation

S Corps may have higher formation and maintenance expenses. As long as you want to continue your S Corp status, you must ensure that the business maintains the tight tax qualification obligations and stock ownership restrictions. You’ll have less flexibility in allocating income and loss. Finally, S Corps may experience closer IRS scrutiny than other entity types.

How we can help

After learning how to set up an S Corp in Colorado on this page, you can review our S Corp page to read more about the pros and cons of S Corps in general. When you’re ready, we can help you form your Colorado limited liability company (LLC) or Colorado corporation. With our wide range of business services, you can rest easy knowing you’ve formed your business with the experts who will keep you on track.

We understand that S Corp elections can be confusing. Rest assured, when you form your S Corp with us, we’ll be here to answer your questions. We’ll help you ensure you complete all the steps to properly form your Colorado S Corp. And we’re here for more than formation, so check out how we can help support your business throughout its lifecycle.

Disclaimer: The content on this page is for information purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

FAQs

  • What are the benefits of creating an S Corporation in Colorado?

    When you form an S Corp in Colorado, you only need to make the S Corp election once with the IRS. Then, your business won’t need to pay corporate income taxes. Instead, you’ll report the business’s income on your personal return. In addition, your salary will include employment taxes so that you can avoid the self-employment tax.

  • How should I choose a name for my Colorado S Corp?

    Because Colorado doesn’t register S Corporations, you will need to name your business according to its entity type. A corporation’s name must include “Corp,” “Co.,” or “Inc.” An LLC must include “LLC” or “Limited” in its name.

  • Should I identify my LLC as an S Corporation?

    No. Even if you elect S Corp taxation, your company will remain an LLC in Colorado. The S Corp election is relevant only for tax purposes. In all other respects, you’ll continue to operate as an LLC.

  • How should I calculate taxes for my S Corporation? 

    Calculate your S Corp taxes using your individual income rate, based on your share of ownership of the company.

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