What Should Be My Top Priorities When Starting My New Business?
Starting your own business is one of the most exciting and challenging things you will ever do. While you look forward to the benefits of being an entrepreneur, you may also feel weighed down by the numerous steps it will take to reach your vision. You have your product or service idea and have researched your market. What comes next? Making a plan can help you break down the process and see your progress. At the top of the list should be these two important priorities: business structure and employment identification number.
Choosing a Structure for Your Business
Businesses come in different structures based on size, purpose, and liability. Choices include:
- Sole proprietorship
- Limited partnership
- Limited liability partnership
- Limited liability company
- Corporation (C, S, B, close, or nonprofit)
- Cooperative
Which one you choose will affect the taxes you pay and the liability of your personal and business assets. Some options may unavailable to you based on your type of business and/or your state.
Getting an EIN
Once you know which entity you want to set up, you can apply for a tax ID number, or employment identification number. This number is for the benefit of the IRS to know how to tax your business, as each structure has different obligations.
For those choosing the application for sole proprietorship, the law does not require an EIN unless you have one more employees or have to file tax returns for excise or pension plans. However, you can choose to get one anyway, especially if you want to hire employees later or protect your Social Security number. Your state may also require it.
If you know you will start a second company down the road, you will have to obtain another tax ID if the new business has a different structure than your existing one. Changes to your business may also warrant a new number. No matter the reason for applying for EIN, use our simple online tool to make the process easy.