If your goal is to start an LLC, or limited liability company, in Colorado, you have to do things in the proper order. If you apply for an EIN number too soon, you could run into trouble if your LLC application is rejected. Here are the steps you need to take to get a tax ID number for an LLC in Colorado
Before you apply for an EIN online for your LLC, your LLC has to be registered by the Secretary of State. If you apply for your EIN before this approval, your EIN will be attached to a business that doesn’t exist. This can be fixed, but it is a lengthy process that involves IRS intervention.
Therefore, you should start by getting your LLC approved first, before worrying about which tax ID number you’ll use. Prior to that, you’ll need to do a name search to ensure that your desired name isn’t already taken.
The next step is to decide who the registered agent will be. This is the person or business responsible for accepting mail on behalf of the company. They must have a street address in the state of Colorado. If the government or a lawyer needs to get in contact with your business for governmental or legal matters, they will use the registered agent as a contact point.
Third, you’ll need to file your Colorado articles of organization. This costs $50 with a $10 renewal fee every year. Finally, you’ll need to create an operating agreement. Even if you are a single party LLC, it’s a good idea to have an operating agreement to keep with your records. This is an internal document that describes financial and functional decisions of how the corporation will operate.
Getting Your Tax ID Number (EIN)
If you’re a sole proprietor, you may have been doing business under your Social Security number for tax purposes. If you’re making the step to become an LLC, you need to get an Employer Identification Number (EIN) instead. This is a fairly simple process.
The form that you’ll need from the IRS is Form SS-4.
Some things to look out for include:
Lines 8a through 8c are specific to LLCs. Note that if you’re a single-member LLC then your taxes are still treated like a sole proprietorship. Multi-member LLCs are treated as partnerships. This means that income will pass through. If you are fine with this tax structure, you don’t have to worry about this. But if you want your taxation situation to be treated like a C-corp instead, you must also file form 8832 after you get your EIN. S-corps will need to file additional documents. Speak with your accountant to find out which tax structure is best for your business.
In line 9a, you select the tax structure for your business. If you are a single-member LLC, select “Other” and write in “Disregarded entity – Sole Proprietorship”. If you have a multi-member LLC, select Partnership unless you want to be taxed as a corporation. Both C and S corporations will select the Corporation box. Write “1120” in the line beside it if you are a C-corp or “1120S” if you’re an S-corp.
Line 13 marks the number of employees you’ll have. If you plan on hiring some, mark in the boxes the approximate number you’ll have after 12 months. Mark 0 in the other boxes. If you do not plan on hiring employees, write 0 in all boxes. If you have employees, talk with your accountant about line 14 as well.
The rest of the form is straightforward. The easiest way to fill it out is to file for your EIN online. You can get the number immediately and start using it. Two weeks after acceptance, you’ll receive a letter in the mail with your EIN. With that document and the rest of the documentation you filed with the state, you’ll be able to open business accounts and start operating legally.