When it comes to forming an LLC or corporation, understanding the steps of registering your business is a critical component of the overall process. However, there are many misconceptions people believe when registering their businesses that cause them to make mistakes and hurt their business. Here are just a few of the most common myths about registering your business to help you navigate through the process as efficiently as possible.
Once your business is registered, nobody else can use your business name.
Many people seem to take this myth as fact, and even though it may seem logical, it’s not quite that simple in reality. The truth is that even though one of the benefits of an LLC includes the right to claim your business name, it only applies to businesses that are registered in the same state. It doesn’t protect the same name from being used nationwide — you’d have to form your LLC in all 50 states to achieve that kind of individuality.
It’s always wiser financially to start your LLC in a state without income tax.
Of course, nobody enjoys paying taxes, but the fact is, this isn’t always a better decision. States like Wyoming, Texas, South Dakota, and Nevada don’t have income taxes, but again, it’s not as simple as it sounds. The tax laws of your business come from the state that it’s actually operated in.
“If you live in California, run your business from California, and make money in California, you most likely will be subject to paying California state taxes – even if you registered the business in Nevada,” explains SecretEntourage.
Keep in mind that when considering an LLC vs corporation, this rule still applies.
Once you’ve completed the process of registering your business, you’re done.
In 2010, there were 27.9 million small businesses in the United States, and many of them would probably like to believe this is true. However, in addition to registering your business, there are further compliance requirements that must be met. These typically include filing an annual report and paying a small annual fee. There are different compliance requirements depending on whether you’re forming an LLC vs corporation, so make sure you’re aware and can keep up with the demands.
Ultimately, knowing the truth behind these myths can help you navigate through the business registration process as efficiently as possible. Don’t let misconceptions get the best of your next venture.
In the first part of this series, we answered some commonly asked questions about applying for an EIN (employer identification number) online. Obtaining an EIN is one of the most important steps of starting an LLC, and even though it can be filed a number of different ways (by fax, by mail, or by telephone), applying online is the method of choice for many business owners due to convenience and simplicity. Let’s get into part two of our FAQ about obtaining an EIN online.
What if the legal name of a business includes a dollar sign ($) or other symbol?
Unfortunately, the IRS does not recognize symbols as a legal part of a business’ name. The legal characters allowed in business names are letters, numbers, hyphens, and ampersands. If your business name does include an invalid symbol, you will have to decide the best alternative when entering the business name. The IRS has a few quick suggestions for simple replacements: consider spelling out the symbol, substituting it for a hyphen or space, or omitting it completely.
How can I tell if an EIN has been obtained online?
EINs that have been registered online as opposed to by phone, fax, or mail have specific prefixes: 20, 26, 27, 45, 46, 47, 81, and 82. If an EIN was obtained online, it’s sure to have one of these prefixes. However, the IRS notes, “We cannot process your application online if the responsible party is an entity with an EIN previously obtained through the Internet. Please use one of our other methods to apply … We apologize for any inconvenience this may cause you.”
What if someone files for an EIN online and then forgets their number?
If you start an LLC, obtain an EIN online, and then forget the number, don’t worry — it’s simple to recover it. Since the IRS updates EIN records immediately, you can call (800) 829-4933, select ‘EIN’ from the options list, and connect with an IRS employee who will then ask a few security questions before revealing your EIN.
According to the National Association of Small Business’s 2015 Economic Report, the majority of small businesses surveyed are S-corporations (42%), followed by LLCs (23%). Ultimately, to create an LLC requires you to obtain an EIN, and understanding the different methods and processes of filing for an EIN can help you make the most efficient decision for your business needs. For more information about how to form a corporation or how to form an LLC, contact My USA Corporation.
There are many LLC advantages, but if you’re interested in starting an LLC or corporation, one of the most important steps you’ll have to take is filing an SS-4 form with the IRS in order to receive an EIN, also known as an employer identification number. This process can be lengthy and sometimes tedious, and before you begin, it’s important to know exactly what to expect. In this two-part blog series, we’ll take a quick look at some commonly asked questions to help you make the best decisions when you file for your EIN number online.
Which business needs can an EIN be used for?
One of the many LLC advantages is registering with an EIN, and once a business owner obtains a valid EIN, it can be used instantly for a number of essential business-related needs. Owners can file tax returns, apply for a business license, and open a bank account, among other things.
Are any business types prohibited from applying for an EIN online?
No — any entity located in the U.S. or one of the U.S. Territories is eligible to apply for an EIN online. However, the principal officer/owner is required to have a valid Taxpayer Identification Number (Social Security Number, Employer Identification Number, or Individual Taxpayer Identification Number) to utilize the online application.
What if a business’ address won’t fit in the online application’s address line?
The IRS’ system only allows for 35 characters to be entered on the address line. Just remember to give the most essential information first, such as numbers, before the less essential parts. The IRS will then validate your address with the United States Postal Service and, if any information was entered correctly, you will be given an opportunity to correct it.
Are there any programs or special software required to access the IRS’ online EIN application?
No — all that is needed to access the application is a computer with Internet access. As long as the computer has an updated version of its Internet browser, users can fill out and submit their applications with ease. Keep in mind, however, that in order to receive a digital confirmation letter, the computer must be equipped wth Adobe Reader.
Ultimately, there are many benefits of an LLC, but obtaining an EIN is an absolutely essential step of the process. Keep an eye out for the next post, where we’ll answer even more commonly asked questions about filing for an EIN online.