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Federal Tax ID Numbers: Should you start with one or not?

As as a sole proprietor starting a business with no employees, etc....tech.ly you don't need to register for a Federal Tax ID Number ....but do or have you?

Or have you only when your business started to grow and you needed one? Was it more complicated than to just go ahead and start with one?

What's everyones opinion on them? Appreciate all answers...ty in advance.

PS And how did you apply for one- easier to do online, by mail or fax, etc. ?

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Permalink Reply by Relax & Rejuvenate on June 10, 2011 at 11:27am

You can get one on line, and I recommend doing so, as well as doing a sub-S incorporation.

#1 advantage to doing a S-Corp is your business "profit", after you pay yourself a taxable salary, can flow through to you as income, but free of the self-employment taxes and FICA taxes, which save you over 15% on the flow through portion.

There are restrictions -- like you can't pay yourself more in flow through than you do in salary.

But you can also create a retirement plan where your company can contribute up to 25% of your total compensation into a fund, which is also a tremendous tax break.

Much easier to pay less taxes as an S Corp than as a self employed

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Permalink Reply by WendyR on November 7, 2014 at 11:17am

At Relax & Rejuvenate, where can I get more information on this topic that you have brought up. I too am entering my own practice as of August of this year. I'm currently opened as a sole proprietorship under my DBA. I could use more detailed information on how to do my taxes and what I should do for the future as to how I should run my business. (S-Corp vs DBA)

Thanks,

WendyR

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Permalink Reply by WendyR on November 7, 2014 at 11:18am

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Permalink Reply by Neal Lyons on February 1, 2015 at 2:01pm

technically you can get one anytime. you don't have to. many do so for liability protection. when you start an LLC or S corp and get a separate EIN for it, you can be an employee of that LLC. therefore your personal assets are protected in the event the LLC is sued. getting it is easy. you can do it online. you can also file for the LLC or S Corp online now in most states. you can do it yourself - although many engage CPAs and lawyers.

liability is thus #1 issue and protection available

the second is what is mentioned by R&R, the financial aspect/ you can classify some income into lower tax brackets and protect some from self employment taxes. you also get to deduct several business expenses you incur and thus reduce your taxable income.

Wendy - our site has many articles on this if you need more info. the number one hurdle to keep in mind is the taxation aspect. as a business person, or self employed, you need to pay quarterly to uncle sam

if you need more personalized help after reading the site, please private message me