Tax Requirements for a Business Start-Up

Are you planning to start a business? Well, there are several State and Federal requirements that you will need to meet in order to operate legally. These requirements depend a lot on the type of business entity you settle on for your business. These start-up requirements include both State and Federal tax registration requirements. Below is a list of some tax requirements for various business entities.

Employee Identification Number (EIN)

The Employee Identification Number (EIN) is a tax registration number that identifies employers and tax agents who withhold various taxes on behalf of the IRS. Most businesses require an EIN, especially if they have employees or if they withhold sales taxes. However, sole proprietors that do not employ may operate without an EIN. You can register for an EIN by filling out an online registration form available on the IRS website. You are also required to send an SS-4 to the IRS to accompany the registration form. You will then receive your EIN and you will use it when submitting any withheld taxes to the IRS.

State Business Registration

Various business entities will have different state registration requirements. You can get the details of these requirements by contacting your respective state business registration office or by consulting with a business attorney. In most cases, your business registration will award you a business number that you will be required to provide when filing various State and Federal taxes.

Books of Accounts

The tax authority requires various business entities to maintain various books of accounts as their primary support documentation for their taxes. It is therefore, important to ensure that you set the right books of accounts according to your business entity at the start of your business. This will enable you to be prepared for your tax returns. Generally, sole proprietors will not require detailed accounts but must maintain consistent schedules and records of business transactions. Partnerships, corporations, and limited liability companies will however, require proper double entry books of accounts and clearly indicate partners’ share of profits or dividend distributions to shareholders. The C-Corporation has more complicated books of accounts to keep. You may require the help of an accountant to set up the right account bookkeeping for your business. You can also purchase and install various accounting software that will assist you maintain proper bookkeeping and assist in preparing the taxes for your business.

State Tax Requirements

Various states will have different tax requirements for State taxes. If your business will be a withholding tax agent for sales taxes for example, you will need some tax registration from your State. Various business entities will also have different tax requirements. This is especially so for the business entities created and governed under the State law. These business entities include S-Corporations, C-Corporations and Limited Liability Companies. S-Corporations, for example, require the owner or owners to elect the option in which they will want to file their taxes. They can file their taxes as a sole proprietor, partnership, tax entity, or a Limited Liability Company.