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local county (if the business will be operated outside of any city’s limits). Most cities or counties require
you to obtain a business license, even if you operate a home-based business.
A federal employer-identification number (EIN), also called a tax-identification number, is required
for almost all types of businesses. Note: your business may also need to acquire a similar tax-identifica-
tion number from your state’s department of revenue or taxation. When you get your corporate charter
(if a corporation), you must apply for a federal Employer Identification Number (EIN). To do so, first go
to the IRS website, download Form SS-4, and fill it out. Then call toll-free (866) 816-2065 to get your EIN
in 15 minutes or less.
Once you get the EIN number, download Form 2553 (S-election, if you want to avoid double taxa-
tion on your company earnings) and fill it out. Be sure to sign as a shareholder in the middle of the page
and as an officer at the bottom. If you choose to form a LLC, you will also need to decide how you want
to be taxed (as a sole proprietorship, partnership, S-corporation, or C-corporation) and make that elec-
tion on IRS Form 8832.
A fictitious business name permit (also called “dba” or “doing business as” permit) is required for al-
most all types of businesses. To make the public better aware of just what your firm offers, it is gener-
ally good practice to choose a business name that describes your product or service. Apply for a ficti-
tious business name with your state or county office when you plan on going into business under a name
other than your own. The bank will require a certificate or resolution pertaining to your fictitious name at
the time you apply for a bank account.
Persons entering into certain kinds of business will have to obtain an occupational license through
the state or local licensing agency. These businesses include building contractors, real-estate brokers,
those in the engineering profession, electricians, plumbers, insurance agents, and many others. Often
they have to pass state examinations before they can get these permits and conduct business. Contact
your state government offices to get a complete list of occupations that require licensing.
If you are planning to run your business from home, you should carefully investigate zoning ordi-
nances. Residential neighborhoods tend to have strict zoning regulations preventing business use of the
home. Even so, it’s possible to get a variance or conditional-use permit; and in many areas attitudes to-
ward home-based businesses are becoming more supportive, making it easier to obtain a variance.
Federal regulations control many kinds of interstate activities with license and permit requirements.
In most cases, you won’t have to worry about this. However, a few types of businesses do require fed-
eral licensing, including investment advisory services.
Tax Strategies.
Tax planning is a year-round event if you want to minimize your business tax bill. Whether it’s surviving
an audit, capitalizing on business deductions, or finding tax-friendly ways to run your business, a good
accountant can help reduce tax obligations and make paying taxes less anxiety-provoking.
Once you have the federal EIN number, you will need to obtain ID numbers for state sales- and in-
come-tax withholding and for the state unemployment tax. Complete the forms for the tax registrations
that you obtained; add the federal EIN number and you can now mail in these state forms. Having the
federal EIN number in hand also allows you to open a corporate checking account.
If you are a sole proprietorship or partnership, you will have to file and pay federal estimated tax re-
ports each quarter based on estimated annual income. Partnerships file an annual information return,
and each partner’s share of profits is included in their individual personal income-tax return. Corpora-
tions must also file for estimated taxes. Maximize what you can deduct and discover what you can write
off by knowing what constitute legitimate business expenses.