In the early stages of conceiving a business, you may not have decided upon the final name of your business or even fully grasp your business structure. We do, however, want to make you aware of the process of registering your business. You will need to register for your local city/county, state, and with the Federal IRS.
Registering for an Employer Identification Number
You will need to start with the IRS, by registering for an Employer Identification Number or EIN. This process is extremely simple and there is a lot of documentation out there on the internet about how to do it, and what designations mean, etc.
The one thing that we haven’t talked about (but will, a bit, next week) is what your legal structure will be. This is a designation for tax purposes. I’m not an accountant/lawyer so I’m not all that familiar with the nuances. But you most likely will want to register as an LLC, S-Corporation, or a partnership. Each has its own advantages and disadvantages. For reference, S’wich It Up is registered as an LLC, while my graphic design firm is registered as an S-Corp.
You can register directly with the IRS via their website (and do it entirely online). You can even get your EIN emailed to you within a couple of hours.
You can even use one of those online legal websites like LegalZoom to do all the legwork for you. Legalzoom will ask you a few questions about your business, and provide resources to help you learn more. After you complete the online process, you will receive a packet in the mail with documentation and next steps. They can register your EIN and register you with your state government as well.
We are not paid by LegalZoom, nor receiving any money to promote their product. Of course, their service comes with a fee (around $100 plus licensing fees required by the state and federal tax entities), but it will save you a lot of time and legwork. You can register all of this information on your own, without the added cost of a middleman, but the cost is not that much in the grand scheme of things.
What is an Employer Identification Number?
The Employer Identification Number (EIN) is the way that the Internal Revenue Service (IRS) will identify you’re business entity. You can view it sort of like your personal social security number. This number helps the government identify you as an individual in a similar way. The EIN is also commonly referred to as the Federal Tax Identification Number.
In addition to simply being able to pay your business taxes, which is very import. The IRS will also use this number to track payments from your business account and to employees. There’s a big benefit to you too of course as the number is often a requirement to conduct business or setup company bank / checking accounts.
As with anything tax related, the topic can become complex quickly and we recommend reading more on this topic here if you want to dig deeper.