Starting a business is no easy feat, especially when it comes to the administrative and legal processes like trademarking your business name, choosing the right structure, and registering your business.
Depending on the nature of your business, you may need to register with your state government, the federal government, or you may not need to register at all. If you’re unsure whether you need to register your business on the federal level, here’s what you need to know.
Do I need to register my business with the federal government?
The following lists a few of the most common factors that determine whether you must federally register your business:
- Business structure. There are many types of business structures, like sole proprietorships, corporations, LLCs and partnerships. While sole proprietors doing business under their own legal names are not required to register with the federal government, most other structures, including partnerships and corporations, are. Additionally, if you want to benefit from tax exemption as a nonprofit or charity organization, you’ll have to separately register with the IRS as a tax-exempt entity.
- Staffing. If you currently have employees or plan to hire employees in the future, you’ll need an EIN to operate your business. According to the IRS, an EIN will allow you to “pay federal taxes, hire employees, open a bank account, and apply for business licenses and permits” — all crucial business processes.
- Required business taxes. An EIN is required for any business that plans on filing Employment, Excise, or Alcohol, Tobacco and Firearms taxes.
- Certain organizational involvement. Most businesses that work with, or are otherwise associated with, trusts, estates, real estate mortgage investment conduits, nonprofit organizations, farmers' cooperatives and plan administrators need an EIN.
- Other. The IRS cites a few other reasons why a business would need an EIN, including whether you withhold income taxes for a non-resident alien, or have a Keogh plan.
Even if you aren’t legally obligated to register with the federal government, there are some good reasons to consider doing it anyway. If your business wants to file for trademark protection, you can register with the United States Patent and Trademark office and protect yourself and your product on a federal level. You also need to be a federally recognized entity if you ever want to apply for government contracts.
[Read: A Step by Step Guide to Starting Your Business.]
Even if you aren’t legally obligated to register with the federal government, there are some good reasons to consider doing it anyway.
How to federally register your business
If you’ve decided to register your business on a federal level, the process of doing so is relatively simple. For most businesses, this simply means applying for a federal tax ID, also known as an employer identification number (EIN).
Your EIN is a nine-digit number that identifies your business’s tax accounts with the federal government. The IRS allows you to apply for an EIN free of charge through several different channels, including online, by mail, by fax or by phone. The person or “responsible party” applying must have a valid taxpayer identification number, such as a Social Security number or another EIN.
Once you have an EIN, you can also register to pay your federal business taxes online through the government’s Electronic Filing and Tax Payment System.
In addition to an EIN, you can also apply for a DUNS number. Like your EIN, your DUNS number identifies your business like a Social Security number identifies a person. Having one can help you establish credit for your business, so you can secure deals with creditors and suppliers. To obtain a DUNS number, visit the Dun & Bradstreet website. This process might take up to 30 days.
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