An S corp Colorado entity is a standard corporation operating in the state of Colorado that has elected a special tax status with the IRS. Under common law, it is recognized as a separate legal entity and provides its shareholders with limited liability. This means shareholders are not liable for any legal decisions made against the company or for any outstanding debts or financial obligations.

Advantages of Forming an S Corporation

There are a number of advantages of being an S corporation:

  • Shareholders are not taxed twice due to pass-through taxation.
  • Shareholders are able to report the S corporation's losses on shareholders' individual tax returns. This may help offset their income. 
  • An S corporation is not required to pay income tax. However, it will be required to file information tax returns.

Check Eligibility

The first preliminary step before forming an S corporation in Colorado is to check that the eligibility requirements are met. A corporation is eligible for an S corporation election if the following is true:

  • There are less than 100 shareholders.
  • Shareholders are not a corporation, an LLC, a partnership, certain type of trusts, or nonresident aliens.
  • The corporation only issues the same stock type.

Choose a Business Name

In Colorado, it is required that the word "corporation," "incorporated," "company," or "limited" is used in the name of the corporation. Refer to the Colorado Corporate Code to check that the selected name is compliant with all Colorado guidelines.

Check Business Name Availability

To check if the business name is available, go to the Colorado Secretary of State's website and enter your proposed business name. 

You cannot choose a name that is too similar to another corporation's name. If the name is not available, the business name will need to be adjusted.

Create and File Articles of Incorporation 

To apply for incorporation, articles of incorporation must be filed with the Secretary of State. While an attorney is not required to file the articles, it is advisable that owners or shareholders consult with an attorney to understand the tax implications. 

The application is available on the Colorado Secretary of State website. To complete the application, the following steps are required:

  1. Access the form from the business section of the website.
  2. Enter the basic corporation information. This will include information such as the corporation name, description of the rights of shareholders, duration of company, bylaws, and the stock type.
  3. Preview the form.
  4. Review and amend errors.
  5. Enter payment and billing details.
  6. Submit the form.

A confirmation of the filing will be emailed, and the progress of the filing can be tracked on the Colorado Secretary of State website.

File IRS Form 255

To file the S corporation with the IRS, Form 2553, "Election by a Small Business Corporation" is required. The form is available on the IRS website, and you must:

  • Complete the form.
  • Obtain signatures from shareholders.
  • Submit the completed form to the IRS.

The IRS will also need to be informed about the tax year the taxation election will be effective.

This form must be filed with the IRS within 75 days of the incorporation date. If the deadline is not met, the corporation cannot be changed to an S corporation until the following tax year.

File Form CR0100 

If the corporation will collect sales tax or have employees, Form CR0100, "Colorado Business Registration" will need to be completed via the Colorado Department of Revenue website

Apply for an Employer Identification Number 

A Federal Employer Identification Number (EIN) is a unique, nine-digit number that is assigned to the corporation. The IRS uses it to identify the corporation, similar to how a Social Security number identifies an individual. It is also used for the purpose of reporting taxes.

To apply for an EIN, complete Form SS-4, which is available on the IRS website 

A corporation will remain an S corporation as long as it satisfies the eligibility criteria of an S corporation or the shareholders do not change the business status.

It is important that the S corporation is subscribed to email notifications, as the secretary's office sends all business reminders electronically. Always keep an active email address on file with the Secretary of State.

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