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Tax season is over (for most of us). So, what’s next for business owners and professional advisors with business clients? With so much disruption and distraction this year, you may have fallen behind keeping up with compliance for business licenses, permits, and identification numbers. Here’s a mid-year business checklist to get you back on track.
Federal Tax ID
Getting a Federal Tax ID number (or an Employer Identification Number—EIN) is optional if you’re a sole proprietorship, but if your business acts as a Corporation, Limited Liability Company, or a partnership, you and your business clients are required by law to have one. Without a Federal Tax ID number or EIN, you can’t get a business bank account or file your business tax returns. You can apply for an EIN online on the IRS website, or CorpNet can obtain one for you.
Federal Licenses and Permits
If a business is regulated by a federal agency, you most likely need a federal license or permit. Businesses selling, manufacturing, importing, or wholesaling alcohol, for example, are regulated by the Alcohol and Tobacco Tax and Trade Bureau. Then, depending on what your business actually does, the requirements and application processing times vary.
State and Local Licenses and Permits
Most of the required licenses and permits for businesses will come from your city, county, and state business development offices. Start with a business license in the city where the business is located. You’ll need to provide data on your business, make sure you’re in zoning compliance, and pay an annual fee. Your local government makes sure your business is operating safely and according to specific regulations and procedures determined by location and industry. In the example of selling alcohol, many states have an Alcohol Beverage Control (ABC) office which regulates on-premise and off-premise sales of alcohol. Likewise, although restaurants are regulated by the Food and Drug Administration (FDA), restaurant owners must also adhere to local regulations such as acquiring a sidewalk café permit. Other licenses and permits may also be required, such as permits for security alarms, parking lots, entertainment, environmental and more.
Specialty Licenses and Permits
There is also a myriad of licenses and permits for professional and niche businesses. Acquiring a specialty license means the business has the specific skills to operate a company in certain fields. For example, hair and nail salons, accountants, legal, plumbers, electricians, collection agencies, daycare, pesticide dealers, and more.
Sales Tax License and Reseller Permit
A business selling products and services subject to sales taxes will need a sales tax license from the state tax authority office. Selling in more than one state? You’ll need a license in each state. Sell taxable products on a wholesale basis to retailers? You’ll need a reseller license (resale certificate)which gives a business permission to sell taxable products without collecting sales tax. Having to collect sales tax usually occurs when a business has a physical presence (or a nexus) in a state. However, there are circumstances (e.g. online businesses) where state laws consider the business to have nexus without a physical presence. This doesn’t have to be overwhelming. CorpNet can register for sales and use tax for you.
Payroll Compliance for Employers
Once you’ve acquired an EIN, you must register with your state’s labor department before you bring on employees. You’re required to pay state unemployment compensation taxes. Depending on your business type, you may also be required to get workers’ compensation insurance. The IRS also requires each employee to fill out IRS Form W-4 (Withholding Allowance Certificate), so you can determine the right amount of taxes to withhold and Form I-9 (Employment Eligibility Verification) to verify each employee is eligible to work in the U.S. If you are not in compliance with payroll taxes, Corpnet can help you register for payroll taxes and get you on the right track.
Moving a Business to a New State
If you or your clients are planning on moving your business to a new state, it’s important to cancel local business licenses and permits before applying for new ones in your new location. Also, be sure to withdraw the business name from Secretary of State’s office and apply for a new one. The IRS needs a change of address for the EIN. Corporations and LLCs can either dissolve the corporation in the old state and reregister in the new state or file a foreign qualification in the second state. A foreign qualification allows a business to do business in a different state than the home state of the business. The process involves submitting a Certificate of Authority (or Statement and Designation) application form and paying fees to the Secretary of State office. Next, you need to hire a registered agent in the new state to handle official federal and state correspondence, tax notices, and corporate filing requirements. CorpNet can also act as a registered agent.