Before you can apply for a tax ID, you will need to ascertain your business entity type. Once you have ascertained your business entity type, you can straight away apply for the Employer Identification Number (EIN) with the Internal Revenue Service (IRS). To apply, you will have to provide your company’s legal name and social security number of the company’s principal officer for the purpose of the tax ID. The principal officer should be a member of the company.
If you have not decided on your business entity type, you can visit the website of Gov Doc Filing to take a simple survey created to guide you to choose from one of the following entity type. If you have any question, you can contact one of their professionals to clear your doubts concerning your application.
One of the most common business entities utilized by business owners is the Limited Liability Company (LLC) because:
- It provides a flexible business structure
- -It protects your personal assets from being at risk
- It has no taxes at the corporate level
- It has the flexibility to structure your company to fit your needs.
The owners of the Limited Liability Company are called members and these members may include individuals, corporations, other LLCs, and foreign entities. There is no limit to the numbers of members in forming an LLC. A single member LLC is a lone member establishing the LLC. The LLC members will be taxed as a sole proprietor where profits and losses are passed through the individual’s federal tax return to the IRS.
For a multi-member LLC where there are more than one member, it is taxed as a partnership. The profits and losses are passed through to the individual members’ federal tax returns. They can also choose to be taxed as a corporation instead of a partnership. If the LLC is formed by a husband and wife, they may choose to be taxed as a single member LLC.
The main reason why many choose to form an LLC company is because of the provision of liability protection on their personal asset. Creditors cannot claim the personal asset of members to pay off the company’s debts.
Before filling in the LLC tax form, the Internal Revenue Service and other agencies have to be informed:
- If there is a change in your LLC mailing address or business location.
- If there is a change in the person who is responsible to act on the behalf of the business.
The notification of change is to ensure that the smooth running of your company will not be hindered or disrupted, and that your company continue to receive whatever notification sent out by the government agencies.