Getting an Employer Identification Number (EIN) is one of the first steps you should do if you’re starting a business in Arizona. The Internal Revenue Service (IRS) issues your company a special nine-digit number for tax purposes. But how much does it cost in Arizona to obtain an EIN number?
Thankfully, getting an EIN number is cost-free. You can request an EIN number by mail, fax, online through the IRS website. You may normally get your EIN number in a few business days because to how simple the procedure is.
But why would you require an EIN number at all? You can decide to get an EIN number for your company for a number of reasons. To report payroll taxes to the IRS, for instance, you’ll need an EIN number if you want to recruit staff. Additionally, opening a business bank account or applying for company credit frequently require an EIN number.
You might decide to get an EIN number if you’re starting a S corporation, which is another rationale. The corporation itself is not taxed on its profits when it is a S corporation, a type of corporation that permits pass-through taxation. The profits are instead distributed to the shareholders, who then include them in their individual tax filings. The corporation’s owners may save a lot of money on taxes as a result.
But does having a S corporation equate to becoming your own boss? No, is the response. For tax purposes, you are not regarded as self-employed if you own a S corporation. Instead, you must pay yourself a fair compensation because you are an employee of the company. Payroll taxes are due on this salary just like they are for any other employee.
It’s also important to remember that a S company might be owned by a single-member LLC. In reality, a lot of owners of small businesses opt to set up an LLC and later select S corporation status for tax purposes. They can so benefit from both types of entities’ advantages.
Last but not least, it’s critical to realize that S corporations are still liable for paying taxes on their income. They are exempt from paying federal income tax, nevertheless. The profits are instead distributed to the shareholders, who then include them in their individual tax filings. S corporations must also pay projected earnings taxes on a quarterly basis.
As a conclusion, getting an EIN number in Arizona is free and necessary for beginning a business. A valid EIN number is a requirement if you’re thinking about incorporating a S corporation. Even though having a S corporation does not qualify you as self-employed, it might nonetheless provide substantial tax advantages. As always, choosing the right entity type for your company requires consultation with an experienced tax specialist.
In a S Corporation, the shareholders—rather than the business—pay taxes on the company’s income in accordance with their individual tax rates. Even though the S Corporation is exempt from paying federal income taxes, it is required to file an annual tax return.