The Cost of an EIN in Colorado and Other Business-Related Expenses

In Colorado, there are a few legal requirements that could cost you money. Getting an Employer Identification Number (EIN), a special nine-digit number provided by the Internal Revenue Service (IRS) to identify your business entity for tax reasons, is one of the first steps in the process. So how much does a Colorado EIN cost?

The good news is that Colorado and every other state in the US offer free EIN applications. It is simple to apply for an EIN online, over the phone, by mail, or by fax. You save time and money by submitting the online application successfully, and the IRS immediately issues EINs.

But other costs, including getting a company license, could come along with launching a business in Colorado. Depending on the kind of business and the city or county it operates in, Colorado’s business license fees change. For instance, a home occupancy permit in Colorado Springs is $75 whereas a regular business license in Denver is $125.

As a business owner, you must also choose your company’s legal structure. The S Corporation (S corp) and the Limited Liability Company (LLC) are two well-liked solutions for small businesses. Although they both provide liability protection for the owners, the taxes and administration structures of the two companies are different.

An LLC is a pass-through structure that enables the business owner to declare the profits and losses of the firm on their personal tax return. Members must pay self-employment taxes, which include Social Security and Medicare taxes, even though the LLC does not pay any federal taxes. In Colorado, establishing an LLC costs $50 plus a $10 yearly report charge.

A corporation that chooses to be taxed under Internal Revenue Code Subchapter S is known as a S corp. The S corporation pays its workers, including the owner, wages and distributes the balance of the income as dividends to shareholders. The owner’s compensation should be fair and on pace with industry norms. An S corp in Colorado can be created for a similar price to an LLC, but to opt S corp status, the owner must submit Form 2553 to the IRS.

Last but not least, S corporations must pay a corporate tax rate of 21% on their taxable revenue, plus any relevant state taxes. At their individual tax rates, shareholders are additionally taxed on the portion of business profits that they own. The IRS requires the S company to submit Form 1120S as part of its yearly tax filing.

In conclusion, getting an EIN in Colorado is free, however launching a business could also cost money for things like a business license and selecting a legal structure. Although the owners of both LLCs and S companies are protected from liability, their taxation and management structures are different. A lawyer or accountant should be consulted before making a choice.