How to Form an S Corporation in Colorado
Introduction
If you’re a small business owner, becoming an S corporation can offer several advantages. First and foremost, it separates your personal assets from your business assets. The IRS considers corporations to be separate entities for tax purposes and gives them their own tax ID number. This means that all income generated by the corporation will be taxed at corporate rates rather than individual rates. Additionally, many small businesses choose to incorporate as S corporations because of the reduced paperwork involved compared with other types of entity types such as C corporations or LLCs (limited liability companies). In this article, we’ll walk you through each step in forming an S corporation: from choosing its legal structure through getting it ready for tax season!
Create a business plan and create a name for your corporation.
Now you’re ready to create a business plan. A business plan is an important document that will help you understand what your company does, how much money it needs, and what kind of structure it should have. Your business plan can also be used as part of your application with the Colorado Secretary of State.
You need a name for your corporation before submitting your application with the state. This name should be unique so that no other company has already registered it as its legal name. If someone else has already claimed this name in Colorado, you may have to pay $100 or more to reserve it (if they are willing). You can search for available names on the Secretary of State website using their “Search for Trade Name Status” tool here: https://www.sos.state.co/BusinessEntitySearch/.
Apply for an employer identification number (EIN) from the IRS.
The IRS assigns you an employer identification number (EIN) when you register your corporation. It’s similar to a social security number for individuals, but it’s issued to businesses instead of people. You’ll need this number if you plan on hiring employees or making certain tax-deductible contributions, so it’s important that you get one as soon as possible.
You can apply for an EIN online using the IRS website or by mail using Form SS-4. The application process takes two or three weeks and is designed to confirm your identity before they issue an EIN.
Choose the correct business entity.
Choosing the right business entity is an important decision for your business. There are several different types of corporations and limited liability companies (LLCs) available in Colorado, but S corporations are the most common type of corporation and have many benefits.
A C corporation can be taxed as a regular corporation or as an S corporation, depending on how it is formed and operated. As an alternative to an S corporation, you may consider forming a C corporation if you want to avoid having to pay self-employment taxes on any profits that you earn from your company’s activities or if you want some control over how much tax is paid by your company. However, there are no significant tax advantages for most businesses when compared with forming an S Corporation in Colorado
File your articles of incorporation with the Colorado Business service center.
Colorado does not require a special license or certificate for S corporations. These companies are considered to be domestic in nature, so they only need to file articles of incorporation with the Colorado Business Service Center (BBSC). You can do this using the online system provided by the BBSC.
If you are incorporating an LLC, you will also have to submit an Articles of Organization form when filing your application for a certificate of good standing with your state. You must include copies with your initial application so that we can verify that it complies with all relevant laws and regulations in Colorado. The Articles may also be used as evidence against any claims made by creditors seeking payment from an organization’s assets after dissolution has occurred..
Hold a meeting for all shareholders and appoint directors for your corporation.
You’ll want to hold a meeting for all shareholders and appoint directors for your corporation. The directors are responsible for the corporation, so you need one or more of them at every meeting. Directors can be reelected or replaced at any time by shareholders.
In addition to their other duties, directors have an important role in electing officers. Officers are people who make decisions on behalf of the corporation when no director is available or willing to do so. They include:
Draft bylaws and adopt policies for your company.
- Draft bylaws.
- Adopt policies for your company.
- Review the bylaws and policies with a lawyer.
- Adopt the bylaws at a later date, if necessary.
Issue shares of stock to shareholders.
Now that you’ve decided to form an S corporation, it’s time to start distributing shares of stock. You should divide your company into a number of equal shares of stock so each shareholder has the same share of ownership and control. To distribute shares, you must first obtain certificates from the Secretary of State indicating that you have filed articles of incorporation in Colorado and paid all fees required by law.
The exact number of shares will depend on what type of business entity you’ve chosen and whether or not there are any restrictions on issuing additional stock (which is less common).
Once all documents are signed, it’s time for your shareholders to transfer their money over! If they’re willing to give up some cash as payment for ownership rights in exchange for future profits earned by their investment (or alternatively just want some dividends), then great! However if not then don’t worry too much because there are still other ways they can contribute financially without paying directly with cash out front:
- They could work full-time at one location while also working part-time elsewhere; this way they’d get paid twice without wasting time commuting between two different offices every day.”
Open a business bank account.
Open a business bank account.
You’ll need to open a separate checking and savings account for your S-corporation. Make sure you have enough money on hand to open these accounts, but don’t worry—the process is quick, easy, and painless. You can look for banks that offer low fees and other incentives for small businesses online or in person at the nearest branch. Your new bank will be able to help you get started with everything from setting up your electronic payments system to setting up direct deposit for employees who work remotely.
It’s important not only that you create separate business accounts from personal ones (so that any accidental transactions are easy enough to trace), but also that they stay separated throughout the life of your company; otherwise it may end up becoming too difficult later on when tax time rolls around!
Hire and pay employees, if applicable to your business model.
When you decide to form an S corporation, you’ll need to make sure that your business model allows for employees. If it does, hiring them will be the next step.
You can hire employees in an S corporation—but they must be shareholders who work at least 1,000 hours per year (or their share of net profits). Employees are responsible for paying their own federal and state income tax as well as Social Security and Medicare taxes on wages paid by the company.
As an employer, you’re responsible for withholding payroll taxes from employee paychecks and filing quarterly and annual payroll tax returns with the IRS.
Request that the IRS tax you as an S corporation instead of a C corporation by filing Form 2553 – Election by a Small Business Corporation.
- To request that your corporation be taxed as an S corporation, you must file Form 2553 – Election by a Small Business Corporation with the IRS.
- File Form 2553 at the same time you file your corporate income tax return (Form 1120S).
- The corporation files Form 2553 and not its shareholders or partners; thus, shareholders cannot make this election on their own behalf if they do not own 100 percent of the stock in their C corporation or LLC at all times during the year.
Follow these steps to go through the process of becoming an S corporation in Colorado
- Create a business plan and select a name for your corporation.
- Apply for an employer identification number (EIN) from the IRS. This is necessary in order to file tax returns, open bank accounts, and conduct other business transactions with government agencies.
- Choose the correct type of business entity: LLC or S Corporation? If you’re forming a one-person LLC, it’s probably best to use an S corporation because it will be easier to pay yourself through your company bank account without having to worry about taxes on self-employment income (you’ll pay yourself only once each year). On the other hand, if you want more protection from liability than an LLC can afford you as an individual owner (and also want some flexibility on how much money you put into your company), then stick with an LLC registration instead of switching over entirely into S Corporation status by filing articles of incorporation with Colorado Business Service Center
Conclusion
Once you’ve made the decision to form an S corporation, it’s important to understand that there are several steps involved in the process. The first step is to create a business plan and choose a name for your corporation. Then, apply for an employer identification number (EIN) from the IRS so that you can open a business bank account and pay taxes on behalf of your company. Next, file articles of incorporation with the Colorado Business service center so that all shareholders hold shares in their names as opposed to ‘doing business as XYZ Corp.’ Finally, prepare bylaws and adopt policies for your company that reflect its purpose and structure. Once these steps are complete, then corporate officers will have authority over matters such as hiring employees or issuing shares of stock!
