If you're contemplating incorporating your business in Colorado, you should consider an llc colorado. Otherwise known as a "single-member LLC", an llc colorado incorporates under the laws set forth in Colorado Rev. Code Sec. 15-4-3. The single-member LLC is distinguished from a double-member or "multi-member" LLC by the fact that only one individual owns or is considered the owner of the LLC (or sometimes the LLC and its owners). Multi-member or double-member LLCs share the same risks and rewards as an LLC with two or more members, but each member is liable for his own tax liabilities as an individual.
There are many tax benefits to an LLC Colorado. If you incorporate as a single member, you're treated as a sole proprietorship for income tax purposes. This means that your personal assets will be exempt from federal income tax. A sole proprietorship is treated as an S-corporation for tax purposes and must report its income and dividends to the IRS. Also, because you are considered a sole proprietorship for tax purposes, you lose your ability to be involved in the Limited Liability Company's election process.
An LLC Colorado incorporates just like a sole proprietorship, and all of the tax benefits and disadvantages that come with it applies to the individual owners of the LLC. If you're a married person, you are still regarded as a single member for tax purposes, unless you elect to have your wife or partner sign as a member. However, if you and your wife or partner both work part-time jobs outside of the home and don't have ownership interest in the business, you will be treated as a double or single member for tax purposes.
Learning About Limited Liability Company (LLC) Colorado
An LLC Colorado has the same benefits as a C-corporation. For example, the LLC can carry on any business activity it intends to perform. This includes the right to sue to bring legal action against anyone who violates its corporate privileges, including competitors. It also gives its business owners the ability to divert the LLC's business profits into their personal accounts. The Colorado Corporations law does not allow personal liability for those contributions.
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Like a sole proprietorship, there are two types of LLCs: service-based and business-based. Service-based LLCs operate under specific contracts, and business-based LLCs are separate entities. The services or activities that the LLC provides include accounting, advertising, consulting, law, writing, management, procurement, human resources, marketing, manufacturing, sales and distribution, and support. There are certain filing requirements for a service-based LLC, but there aren't any filing requirements for a business-based LLC.
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Because an LLC is a separate entity from its owner, it has its own operating agreement. Each member of an LLC has the right to sue any member of the LLC that does something wrong. However, in order to start an LLC, there must be at least one member. For example, in a service-based LLC, each member would have filed a separate application. Then, when the business was started, each member would have made an additional application to join the LLC.
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In addition to meeting the basic requirements that every Colorado business must meet, an LLC has some other unique requirements that individual businesses should follow. To begin the process of opening an LLC, each member must file an application, including a power of attorney form if needed, business name, and statement of financial status. There are several reporting requirements, including filing an annual report with the secretary of state detailing its income and assets. Business owners must also prepare their personal information and pay the appropriate tax fees.
If your business will have employees, you must register with the state before you can take the test. Additionally, all LLCs must file an annual report with the state showing its status, including its tax status, number of directors, and members. Lastly, all LLCs filing Articles of Organization with the state must also provide notice to all creditors that they are not personally liable for the debts of the LLC. This eliminates the double liability that could otherwise befall an LLC. To learn more about how an LLC can benefit your business, contact an attorney knowledgeable about business law in Colorado.
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