Week 6. Setting up the legal infrastructure of your business - EIN

By far, the most daunting task to an individual seeking to own and operate a business is taking the steps to legalize your dream - the registering of your business with both the Federal and State governing bodies. Here, we will provide you with basic information that will explain this process, why it's necessary, and why you shouldn't dread putting your passion into action.

So what does it mean to "legalize" your business? Well, we're glad you asked. Legalizing - or legitimizing - your business means filing with the Federal Government for an Employee Identification Number (EIN) while simultaneously filing with your State Government to incorporate your organization (e.g., LLC, S-Corp, C-Corp).

Employee Identification Number

That begs the question, what is an EIN and why do I need one? According to sba.gov, "An EIN is a unique nine-digit number that identifies your business for tax purposes. It's similar to a Social Security number but is meant for business related items only."

You use your EIN to file business taxes, keeping them separate from your personal taxes. This is a fantastic way to avoid prison time as well as allowing you to write off business expenses that may save you thousands of dollars come tax season. Additionally, you need an EIN to open a business checking & savings account. Think that you might have employees in the future; hiring decisions shouldn't prompt you to think about when, how, where, and what, you're going to pay. A business bank account is one of the main building blocks of a successful business. Also, it legitimizes your business to consumers, when they say "who do I make this check out too?" you can say with pride - make it out to (Your Business Name Here).

How do you know if your business requires an EIN? Click the link below to the IRS main website and see if your business meets any of the criteria.

Do You Need an EIN? | Internal Revenue Service (irs.gov)

So how do you get an EIN? Follow the link below for specific instruction.

How to Apply for an EIN | Internal Revenue Service (irs.gov)

Step-by-step guide? Check this out:

Lesson 1- Federal taxes and your new business (irsvideos.gov)

How much does it cost? 100% FREE

As always, if you have any questions, our experienced consultants are standing by to answer all of your questions. Happy building!

To Infinite Success,

The Biz Doc