Starting a business can be both exciting and challenging. If you have decided to start an S corporation in Colorado, there are certain steps you need to follow to ensure success. An S-corp is a type of corporation that offers the shareholders limited liability while allowing it to have fewer than 100 shareholders. The business will be treated like a partnership, which means income is passed through to the shareholders for tax purposes. Follow these steps to start an S corp in Colorado.
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Step 1: Choose a Name for Your Corporation
Before you can start an S-corp in Colorado, you need to choose a name for your corporation. The name you choose must be unique and distinguishable from other business entities operating in the state. You can check if the name you have chosen is available on the Secretary of State’s website. Once the name is available, you need to reserve it to avoid someone else from using it. The name reservation is valid for 120 days.
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Step 2: File Articles of Incorporation
After the name reservation, you must file the Articles of Incorporation with the Colorado Secretary of State's office. The articles must include:
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- The name of the corporation
- The address of the principal place of business
- The name and address of each incorporator
- The name and address of the registered agent
- The number of authorized shares
Step 3: Obtain an Employer Identification Number
An Employer Identification Number (EIN) is a unique number used to identify your business entity. The government uses this number to track business tax information. You can get an EIN from the IRS website, and it is a free service. If you already have an EIN, you will need to notify the IRS of your new S-corp status.
Step 4: File the Colorado Sales Tax License Application
If you intend to sell goods or services, you must register for sales tax. You can register for sales tax on the Colorado Department of Revenue website. You will collect sales taxes on behalf of the state from your customers. Failure to register and collect sales taxes, where applicable, can lead to penalties.
Step 5: Choose a Registered Agent
As an S-corporation, you must choose a resident of Colorado to serve as your registered agent. They will receive legal documents and official notifications on behalf of the business.
Step 6: Pay Required Fees and Register for Licenses and Permits
Before you can legally operate as an S-corporation in Colorado, you must pay the required fees and register for appropriate licenses and permits. Fees vary depending on the type of business, and they range from $50 to $750.
Step 7: Adopt Bylaws
As an S-corp, you must adopt bylaws that guide important decisions regarding how your organization operates. It should include key details like what the officers' roles are, the actions that shareholders can take, and how to buy out inactive shareholders.
Step 8: Hold the Initial Meeting
Once the incorporation process is complete, hold an initial meeting with officers and other incorporators to discuss important aspects of the business. Topics like the appointment of officers, the establishment of a board of directors, and the approval of bylaws should be covered during this meeting.
Conclusion
Starting an S-corp in Colorado can be done through careful planning and following the proper steps. Choosing a unique name, filing articles of incorporation, obtaining an EIN, registering for sales taxes, selecting a registered agent, adopting bylaws, paying required fees and registering for applicable licenses and permits, and holding the initial meeting paves the way for a successful S corporation. Offering shareholders the freedom to operates as partnerships will lead to new perspectives and further growth of the business. In no time, you'll be running a successful S corporation.
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