Business Planning Start-Up Guide
This is part two of operations. In this section, you’ll take action to set up a “legal person” apply for a tax identification number for your business, and identify the license and other regulations you’ll need to operate above the law. For some this will be an easy step for others it will take some research and time to complete all the paperwork.
We discussed legal entities earlier, so you should have made up your mind if you’ll use one and which one you’ll utilize. I strongly suggest your business use a “legal person.” But of course, like all things, you are the boss. Again, check out the special report, Even Superman Needs a Legal Entity.
Once you decide on which legal form you will have, it’s now time to consider the government and taxes. Don’t skip the next item, it takes only minutes. It may be the easiest item you’ll do in this step.
Warning: Keep your personal and business entities separate. That includes bank accounts, vehicle registration, credit cards, and the lot. If you use your business as an ATM or “co-mingle” you assets, the courts will consider the “corporate veil” pierced; and gone are any and all legal protection.
Like all things this century, the government has their fingers in it. Thank your “progressive movement” friends. There is no business that can avoid regulations in one form or another. You’re welcome!
About the Progressives: The progressive movement first make its mark on America with President Woodrow Wilson’s presidency (1913-21), who incidentally re-segregated the military by race (now that’s progressive!). One of the great progressives was President Franklin D. Roosevelt (1933-44) who instituted massive government regulations and restrictions on personal liberty, taking full advantage of the economic depression within his presidency to reshape government.
The term “progressive” sounds forward thinking and modern, but it really means more rules, more government, more debt, more spending, and more taxation. The end result is destruction of individual liberty for the good of certain “groups” or that which government deems more “fair” or appropriate.
This political and social movement often use envy to divide America’s “melting pot” by social-class and racial division. The progressives are famous for rename their programs and actions with upbeat, progressive terms. For example, the progressive income tax (16th U.S. Constitutional amendment) and, recently, the The Affordable Care Act (Obama Care). There are many fine books on this subject. I suggest reading The Forgotten Man: A New History of the Great Depression by Amity Shlaes, published by Harper Perennial (reprinted 2008).
Federal Business Identification Number
Most will need a business tax identification number, unless you are a sole proprietor and do not have employees. If this is you, it may be a good idea get one anyway; because, it will make your company ready for the future. When you form an legal entity, such as a Limited Liability Company or corporation, you’ll need an Employment Identification Number (EIN) to open a bank account and affiliate with suppliers.
The name is misleading because it is your company’s identification number for all tax matters and more. Like you Social Security Number (SSN) is used for more things than the Social Security Administration. Having an EIN also helps put a level of identity theft protection between you and your business. I always get one for the businesses I start because you’ll eventually need one.
If you wait, you’ll have to change your bank account information later. If you don’t plan to expand and grow just use your SSN. If you sell items that have a sales tax, you’ll probably need an EIN as well. In fact, some suppliers will not take you seriously unless you have one – and will not do business with a company with an SSN.
I think the answer is obvious, but it’s up to you. It’s easy and takes about five or 10 minutes to get. You can call the Internal Revenue Service (IRS) at 267-941-1099 or go online to get one. Be sure to write it down and keep it handy. You’ll need it during the start up process.
Requirements vary from state to state. In fact, they vary from locality to locality. In essence, what you do for the Feds will be the first step for most state governments. Most city and local governments (and some states) require a business license. Do a web search under you city, county, and state for licenses. Also, the tax commission and your state’s Secretary of State are good sources, too.
Many states have a sales or use tax. Be sure to inquiry into this if you sell products. Again, a web search will generally help you find the right government agency. Read about Idaho’s sales tax.