Numbers – you have a Social Security Number, a Driver’s License Numbers, credit card numbers, numbers, numbers… But to start a business, you will want new numbers; an Employee Identification Number (EIN) and state business numbers. It is possible to do without an EIN if you are a sole proprietorship that will not be subject to sales tax or payroll withholding. You can always get one later if you need it. But check into what you will need to set up a checking account for your business and what your state requires.
Getting an EIN is simple. You can get the form off the IRS Web Site (You need a SS-4) Once you have that filled out, you can mail or fax the SS-4 to the IRS, or immediately get a number by phone or online. You will receive a letter in a few weeks for your records. If you have questions, ask your preparer or call the IRS. Basically, the form wants info on the firm, what type of entity and who is in charge. It asks you to make an estimate of payroll and income for the first year. The payroll number gives the IRS an idea how often to set up you payroll tax deposits. Keep track of the number and how you named your business on the application.
Once you have your EIN, you can move on to the state numbers. This you will have to research since every state has a different set up. Check with the tax department to see what you need for payroll, sales, or use tax. Don’t forget specialty taxes. Kansas has special requirements if you are selling alcohol, tobacco products, or are running a dry cleaner. If there is a special state tax, I would make sure that there is not some Federal registration, too. Hopefully, your research has turned that up and you’re ahead of me on that.
If you haven’t done it before, this is the time to register with any other state department. In Kansas, partnerships, corporations, LLCs all register with the Secretary of State (and pay and annual fee) as part of setting up the business. Some states require sole proprietors to also register.
So now you are ready to start your business. This series was never meant to be a step by step guide to opening a business. My purpose is to keep you out of tax trouble and get you thinking as a business person. If you need more help, look at the start up resources suggested in the “Research” post. However, there are still a lot of tax issues that can get a business own into trouble and I will cover them. But please remember that some of these are very complex issues and I will only be doing an overview.