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New Business Kit; Chapter 2-Selecting Your Business Entity
Internal Revenue Service
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A significant task for the new business owner is assuring that the business is properly complying with the extensive tax and information filing requirements imposed by various governmental agencies. Stiff penalties are commonly assessed if the required forms and returns are not properly prepared and timely filed. There are several forms required to be filed when the business is started. While this chapter is not intended to be an all inclusive list of the filing requirements, it summarizes some of the more prominent requirements common to most businesses. Many industries have specific filing requirements which are not part of this text, but which nevertheless, must not be overlooked. Professionals with experience in your industry should be consulted to assure that any such filings are properly handled.
All tax forms filed with the Internal Revenue Service require the use of a Federal Employer Identification Number (FEIN). This number is obtained by filing a Form SS4 with the Internal Revenue Service. A new business that is either a corporation, LLC or a partnership should file a Form SS4. A sole proprietorship will need to file an SS4 if the hiring of employees is anticipated
There is no deadline for filing Form SS4. However, to avoid substantial confusion file your Form SS4 early. If an income tax form is filed without an FEIN, the Internal Revenue Service will assign one. It is not uncommon for the Internal Revenue Service to assign more than one FEIN to a business, which can result in notices for delinquent tax returns that have been filed using a second FEIN.
Most filings with the Internal Revenue Service come under the headings of income and payroll taxes. Payroll tax requirements are detailed in Chapter Four. Income tax filing requirements and tax planning are discussed in Chapter Six.
To operate a business you must obtain a business license in both the city and county you are located. Applications can typically be obtained at the city hall and/or the county court house where your business is located. At the time of filing the application a fee must be paid. The license is issued immediately and must be posted in plain sight at your place of business. In some cities and counties, the license, with the related fee, must be renewed annually.
The following summarizes some of the more significant filing dates for a corporation using a calendar year-end. Many of these requirements also apply to partnerships and sole proprietorships. Naturally, if a year-end other than December 31, is used (see Chapter Five) some of these dates will vary.
There are also numerous other tax filing deadlines if you deal in certain regulated industries such as utilities or petroleum.
*Larger companies have to file sales tax returns on a monthly basis.
The following are instructions for filling out Form SS-4:
(1) This is the official corporate name if you are a corporation; if a partnership, the partnership name as shown on the partnership agreement; or if you are a sole proprietor - the owner's full name.
(2) Sole proprietors and partnerships will generally be required to use a December 31 year end. However, a regular "C" corporation can select a fiscal year end. This is discussed further in Chapter Five. Although you are asked to report your year-end on this form, this election is not binding. The binding election of a year-end is made on your first income tax return.
(3) Estimate the first day you will pay wages. To avoid confusion, this form should be filed as far in advance of this date as possible.
(4) This number can be estimated.
(5) This question refers to the entity, not the owner. Normally, a partnership or corporation will have only one FEIN. However, a sole proprietor may have several businesses.
|Links to other Chapters|
Chapter One -
Selecting a Legal Entity