Does my e-business need a tax number?
One of the best ways to start a business on a budget certainly is launching an e-business. While you can’t escape from every other expense, there are still many good gains like decreased fixed costs.
One of those inescapable costs are the cost of doing business within the state’s recognition, which means, taxation and the legal requirements. Though most of your time and effort will be spent on the actual business activity like marketing, sales, customer relationships, building a reputation etc; there will still be some room for the errands. But it doesn’t have to be so complicated. Here we reveal the basics of the e-business legal necessities.
First thing that comes to mind is the Federal Tax Id. Should you have one? What about EIN or a simple Social Security Number? What are the differences? Let’s clear up these terms and find out who needs which of them and why.
Also referred to as an EIN (Employer Identification Number), a Federal Tax ID is a federal identification number that IRS (Internal Revenue Service) issues to your business to identify its entity. Whether or not you need it depends on your plan about hiring other employers or going solo. You don’t have to acquire an EIN if you’re not hiring/planning to hire in the future. In this case, you are a solo proprietor and your SSN (Social Security Number) will be enough to be used for your business entity. This is the basic for the solo proprietor however, tax returns and rules change from one state to another, so it’s best to check local legal formalities.
For the other option, the conditions where you need to acquire and EIN is as follows:
- You have/ plan to have employees.
- Your business is a corporation or a LLC.
- You file any of these tax returns: Employment, Excise or Alcohol, Tobacco and Firearms.
- You withhold taxes on income, other than wages, paid to a nonresident alien.
- You have a Keogh plan.
- You are involved with: trusts, IRAs, exempt organization business income tax returns, estates, real estate mortgage investment conduits, nonprofit organizations, farmers’ cooperatives or plan administrators.
There are different ways made available to apply for a tax ID which are online, via telephone, by fax, or through the mail.
Having been got rid of the legal errands, now you can focus actually on establishing and growing your business. As we were talking about doing all these on a budget, what you seek in all of the business decisions you make would be related to a high ROI (return on investment). When you put that priority, most of the choices you’re going to make appear themselves. Like, investing