A Subchapter S business, sometimes known as a S Corp, is a type of business that offers tax advantages to its shareholders in the United States. Subchapter S of the Internal Revenue Code governs the taxation of S Corps, which enables the corporation to distribute its profits, tax credits, and other benefits to its shareholders, who then report their portion of the profits on their individual income tax returns. Like most states, Colorado taxes S Corps in accordance with federal law. S Corps are exempt from state income tax in Colorado. How to Form a S Corporation in Colorado
A corporation must first be established as a C Corporation in order to become a S Corp in Colorado. The corporation must submit an election to the Internal Revenue Service (IRS) once it is incorporated in order to be taxed as a S Corp. To be eligible for S Corp status, a corporation must meet a number of requirements, including having no more than 100 stockholders and just one class of stock. Additionally, each shareholder must be an individual, an estate, or a particular kind of trust. Costs of Forming a S Corporation in Colorado
Several variables, including the type of corporation, the number of shareholders, and the intricacy of the firm, affect how much it costs to form a S Corp in Colorado. Fees for submitting articles of incorporation, registering with the Colorado Secretary of State, and acquiring any required licenses or permissions are in addition to the $50 formation fee for a C Corporation in Colorado. The IRS requires a filing fee of $255 to obtain S Corp status.
The federal extension for S Corps is accepted by Colorado. The S Corp will automatically be granted a state extension to submit its Colorado tax return if it has requested a federal extension. The state has granted a six-month extension, and in order to avoid fines and interest, the S Corp must file its return by the new deadline. Taxation of LLCs in Colorado
In Colorado, Limited Liability Companies (LLCs) are taxed similarly to S Corporations as pass-through businesses. Colorado does not impose a state income tax on LLCs. Instead, the LLC passes through its income, credits, and deductions to its members, who then report their portion of the LLC’s income on their individual income tax returns.
In conclusion, S Corps in Colorado are taxed under Subchapter S of the Internal Revenue Code and are not subject to state income tax. A corporation must first be established as a C Corporation and submit an election to the IRS in order to become a S Corp in Colorado. Colorado accepts the federal extension for S Corps and varies the costs associated with forming a S Corp. LLCs in Colorado are not subject to state income tax because they are taxed as pass-through businesses.