The process of starting a business can be extremely challenging, especially when it comes to the financial and legal requirements. Getting a DBA or EIN first is one of the most frequent queries that business owners have. The response to this query is based on the objectives and needs of your company.
A legal registration known as a DBA, or doing business as, enables a business to use a name other than the owner’s legal name. On the other hand, the IRS issues firms with an EIN, or Employer identifying Number, which is a special nine-digit identifying number used for taxation.
It is advised to obtain your EIN initially if you are beginning a new business and do not yet have a legal entity registered. This is due to the fact that registering your DBA will require an EIN. The IRS website makes it simple to apply for an EIN online. You can proceed with registering your DBA in your state once you obtain your EIN.
When a business requests credit, an EIN is also necessary. It is beneficial to have a distinct credit history for your business from your personal credit. While it is feasible to apply for credit using your SSN, it is advised to utilize your EIN as it helps to safeguard your personal credit score.
Opening a business bank account, applying for a business credit card, and making on-time payments are all procedures that need to be taken in order to establish credit with an EIN. By doing this, you can build your company’s credit history, which will be useful if you ever need to ask for funding or a loan in the future.
You might be wondering if you qualify for a tax return if your company encounters a loss. The structure of your company will determine the response to this query. Your business losses can be written off against your personal income taxes if you operate as a sole proprietorship. However, if your company is organized as an LLC or corporation, it is treated as a separate legal entity, and any losses can be carried over to subsequent tax years.
In conclusion, obtaining your EIN before beginning a new business is advised because it is necessary for registering your DBA and building your business credit. Making on-time payments and building a solid credit history are necessary for establishing credit with an EIN. The tax repercussions of a loss for your company also depend on the way it is structured. For specific tax advice pertaining to your business, always seek the guidance of a tax professional.
Yes, you must submit tax returns to the IRS as an LLC. However, how your LLC is taxed will determine the precise tax needs for your LLC. You will file your taxes as a sole proprietorship if your LLC has just one member. Your taxes will be filed as a partnership if your LLC has more than one member. You can also decide whether your LLC will be taxed as a C corporation or a S corporation. It is crucial to seek advice from a tax expert to make sure you are fulfilling all of your tax requirements as an LLC.