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Legal Advice at the Speed of BusinesSTM from a Licensed Attorney – Right here in Colorado

COMPARISON OF COLORADO CORPORATION CHARACTERISTICS

  Individual Ownership Partnership Limited Liability Company("LLC") S Corporation C Corporation
Characteristic Owner Partner Member Shareholder Shareholder
Limited Liability No. No. Yes. Yes. Yes.
Participation in Management Yes. Yes. No statutory restrictions. In CO, an LLC may be member or manager managed. No statutory restrictions. No statutory restrictions.
Classes of Ownership Interests N/A Multiple classes are permitted. Multiple classes are permitted. One, but differences if voting rights can exist. Multiple classes are permitted.
Eligibility for Tax Status N/A Must have 2 or more partners for Federal tax purposes. No restrictions for Federal tax purposes, but if only one owner the entity will be disregarded. Various eligibility requirements including number and type of shareholders. No restrictions.
Continuity of Life N/A Upon dissolution a partnership continues unless there is a vote to terminate. In CO, an LLC has perpetual existence unless dissolved by the personal representative of the last member. Yes, perpetual. Yes, perpetual.
Types of Owner N/A Any. Any. Limited to U.S. residents and citizens and to certain U.S. trusts and estates. Any.
Number of Owners One At least 2. No restrictions. CO permits one owner LLCs. 1 to 100. No restrictions.
Admission of Owners without Significant Adverse Taxation N/A Yes, so long as there is no "capital account shift." Yes, so long as there is no "capital account shift." Yes, so long as any liabilities assumed by the corporation do not exceed the basis of the assets transferred to the corporation. Yes, so long as any liabilities assumed by the corporation do not exceed the basis of the assets transferred to the corporation.
Withdrawal of Owners N/A A general partner always has the power but not necessarily the right to dissociate from a general partnership Except for members in a "family" LLC, a member always has the power but not necessarily the right to withdraw. No, but there may be a shareholder buy-sell agreement. No, but there may be a shareholder buy-sell agreement.
Certainty of Tax Status Yes. Yes. Yes. No, improper shareholders and other technical rules may cause S corp to be a C corp. Yes.
Transferability of Interests Yes. Restrictions are imposed generally in the partnership agreement. Restrictions are imposed on transfers of governance rights, but generally there is no restriction on financial rights. No restrictions required but if transferred to impermissible shareholders, lose S status. No restrictions required.
Levels of Income Tax One. Federal tax is at partner level only. Most are treated as partnerships for Federal tax purposes but can elect to be treated as a corporation. Shareholder level tax and CO corporate taxes. Both corporate and shareholder taxes (double taxation).
Deductibility of Losses N/A Partners may deduct the partnership's losses only to the extent of their tax basis including their allocable share of partnership debt. Members of an LLC taxable as a partnership may deduct the LLC's losses only to the extent of their tax basis including allocable share of LLC debt. Shareholders may deduct the corporation's losses only to the extent of their tax basis in their stock that does not include any portion of the corporation's debt. Shareholders may not deduct any of the corporation's losses.
Fiscal Year Generally calendar year. Generally calendar year. Generally calendar year. Generally calendar year. Easier to choose fiscal year.
At-Risk Limitations Applicable. Applicable. Applicable. Applicable. May apply to certain closely held corporations.
Entity-Level Debt in Tax Basis in Ownership Interest N/A A partner's tax basis in his partnership interest includes his allocable share of partnership recourse and nonrecourse debt. When taxed as a partnership, a member's tax basis in his LLC interest includes his allocable share of LLC debt deemed nonrecourse. A shareholder's tax basis in his stock does not include any portion of the corporation's debt, including debt guaranteed by the shareholder. A shareholder's tax basis in his stock does not include any portion of the corporation's debt.
Taxation at Liquidation No. Generally nontaxable at the federal level. CO will tax certain sales of property. Generally nontaxable at the federal level. CO will tax certain sales of property. Generally nontaxable at corporate level but taxable at shareholder level through flow-through of corporate tax items. CO taxes in the same manner as C corps. Taxable to both corporation and shareholders.
Cash Distributions N/A Generally nontaxable to the extent of a partner's tax basis in his partnership interest. Generally nontaxable to the extent of a member's tax basis in his LLC interest. Generally nontaxable to the extent of the shareholder's tax basis in his stock. CO treats S corp dividends the same as C corp dividends. Taxable as dividends or as a redemption depending on rules of Internal Revenue. 
Self-Employment Tax Yes. Yes. Yes. No, except FICA is due on compensation. No, except FICA is due on compensation.

 

Have additional questions? Please be sure to read our LLC FAQ section to further understand a Colorado Limited Liability Company.