Why Should You Incorporate Your Colorado Business?
The major reason to incorporate is for Liability Protection for you. If you have properly formed corporation in the state of Colorado, then the parties that your corporation deal with can only bring suit against your Corporation or Limited Liability Company and not you as an individual. This allows you to protect your house, cars, bank accounts and other investments from potential law suits.
Corporations and Limited Liability Companies can provide tax breaks that are not necessarily available to individuals. This is particularly true with the new Trump tax legislation. “S” Corporations can alleviate some tax burdens by reducing the amount of self-employment taxes that you may be required to pay.
You Have Options
We understand you have options when it comes to incorporating your business. Unlike other non-attorney formation services, with the Law Offices of E. Christopher Lang P.C., your business is formed by a licensed Colorado attorney. Period. No “form fillers” or “advisors” here. Our attorneys are licensed by the State Bar of Colorado to advise clients on legal issues, which means we can discuss special circumstances and needs you may have, as well as notice important issues and bring them to your attention. Only a licensed lawyer is permitted by law to do that.
Starting a business entails much more than forming an entity. That’s why we walk you through a whole host of important additional options you might want for your company. In order to do business, you may need things such as Tax IDs, Employer IDs, Sales Tax Permits, New Hire Reports, and more.
- Consult with an Attorney
- Articles of Incorporation
- Customized By Laws
- Stock Certificates
- Customized Organizational Minutes
- Name Search
- Tax Identification Number: EIN
- Sub Chapter "S" Election
- Colorado Business Registration Form
- Corporate Booklet
- Do's and Don't List as a Corporation
What to Expect
An “S” Corporation is an entity formed under the laws of the State of Colorado. It is a standard corporation that provides liability protection to its shareholders. The shareholders are the persons that actually own the corporation. The Corporation will also have Directors and Officers. These persons will manage the corporation and run its day to day operations. To qualify as an “S” Corporation, one must make a valid election with the IRS within 75 days of incorporation by the State. A valid election allows the corporation to be taxed as a pass-through entity. This means that the corporation will file a tax return, but all of the profits and losses of the corporation will flow out to the shareholders in accordance with their ownership in the corporation. In order to have an “S” Corporation one must have less than seventy-five (75) shareholders, all shareholders must be U.S. Citizens and the corporation can only possess one class of stock. (General Voting Stock). “S” Corporations are required to file an 1120S tax return form due on March 15 of each year. You will also be required to file an annual report with the Secretary of State. The cost of that report is currently twenty-five dollars ($25.00). You should open a bank account in the name of the corporation. All corporate income should be deposited into that account and corporate expenses should be paid from that account as well. You are also required to hold yourself out as a corporation. Your letterhead, business cards, invoices and other documentation should all be identifying the corporation itself and not you as individuals.
Feel free to inquire on the costs for dissolving a corporation in good standing; depending on the details of your situation will determine which rate applies to you. Dissolution or revival (restoring to good standing) of suspended corporations is generally handled on an hourly rate basis.
When you've decided to wind down your business, but you need to take care of several important steps to limit your liability for lawsuits and government fees. Several months after you send notice to your creditors that you're going out of business, and after you've settled debts with all known creditors, it's time to officially end your corporation or limited liability company (LLC). You need to dissolve your entity with the secretary of state or the corporation’s division in your state by filing a form or two. By dissolving your entity, you ensure that you are no longer liable for paying annual fees, filing annual reports, and paying business taxes. If you don't dissolve your corporation or LLC, you could be looking at thousands of dollars in accumulated fees and penalties after a few years.
Officially dissolving your business also puts creditors on notice that your business can no longer incur business debts. In fact, in some states, if you don't notify your creditors and customers by officially dissolving your business, they can sue you for a longer period of time.
Get a Tax Clearance If Necessary
In some states, before you are allowed to formally dissolve your corporation or LLC, you are required to obtain something called a tax clearance, consent to dissolution, or verification of good standing from your state tax agency. In these states, the secretary of state or corporations division will not allow your corporation or LLC to dissolve if you have not filed your last tax return (checking the "Final tax return" box and writing FINAL at the top) and paid all taxes owed.
To get the clearance or consent of the tax agency, you submit a request by phone or fax. If you are current on filing tax returns and paying state taxes, you will receive a letter or certificate declaring that you have no tax liability.
Limited Liability Companies (LLC)
LLCs are another very popular entity for small business owners today. They provide the same Liability protection as a Corporation does. They also have the same requirements that you must hold yourself out as an LLC to the public via your business cards, letterhead, invoices and telephone ads. Limited Liability companies are also a flow through entity. They are required to file a tax return, generally a form 1065. Limited Liability Companies closely resemble partnerships. They can have managers who run the company on a day to day basis. They also have members. These are the persons that own the Limited Liability Company. Limited Liability Companies are generally more flexible than “S” Corporations. They can send profits and losses out to the partners in accordance with the operating agreement. Therefore, your ownership does not necessarily reflect the amount of profit or loss that you may receive from the LLC on an annual basis. These amounts/distributions can also be changed on an annual basis. The operating agreement is similar to a partnership agreement and sets forth all of the rules of operation for the LLC. However, all the income earned by the Limited Liability Company is subject to self-employment tax and as such the tax liability of an LLC is generally higher than that of an “S” Corporation depending on the type of income earned by the entity (eg. Ordinary vs. Passive Income). Limited Liability Companies are a great conduit for passive income so that it retains its passive income classification therefore they are commonly used as the entity for Rental Properties.
Contact us in Denver, Colorado, to understand the options available for your business. Our lawyer offers services for clients throughout the area.