Lester Bahr CPA, LLC
Allentown, Pennsylvania
Enlightened solutions within your grasp
When you start a new business
You need to make sure you comply with the numerous tax and information filing requirements imposed by the various governmental agencies. Failure to take proper procedures, meet a filing deadline or overlook an important registration can result in penalty assessments. There are usually several forms required to be filed at the federal, state and local levels. The number of forms required will depend on such factors as whether you will have employees, collect sales tax, require special permits and licenses for your industry, etc. I discuss only the most basic ones here. If you are starting a business or changing some aspect of your existing business, I strongly suggest you contact your CPA so as not to overlook an important notification filing. Depending on what type of business entity you organize as will also affect what you must register for.
Do you need a business license?
Well, it depends. For many businesses, it will be sufficient to just obtain a local business license in order to comply with the law. But, some businesses may first require you to obtain a specific state license or certification in order to be in compliance. To list all the different agencies of contact that might apply to your situation is beyond the scope of this article because there are simply so many of them. Therefore, I recommend that you contact your accountant for guidance.
Federal registrations
Generally, most tax forms filed with the Internal Revenue Service will require the use of an Employer Identification Number or EIN. You can obtain this number by filing Form SS-4 with the IRS. Generally, it is best to file for your EIN number as soon as possible after creating your new business.
State registrations
Regulations vary from state to state. Pennsylvania, for example, uses a multi-registration Form PA-100. Relevant sections of the form are completed to acquire state identification numbers, provide employee tax withholding and unemployment experience information, register to collect and submit sales tax, and obtain numerous special purpose licenses, etc.
For example, if you will be selling products or services which will be subject to state sales tax, then you must apply for a sales tax license number. If you will have employees, you must register to withhold and remit state taxes from the employees wages. You will also need to establish an unemployment compensation account as well as certify that you carry workman's compensation insurance.
Local registrations
These may differ widely depending on the municipality in which you will conduct business. Generally, to operate a business you must obtain a business license in both the city and county you are located. Applications and information can typically be obtained at the city hall and county clerk's office where your business is located.
As stated at the onset, although some registration filings are almost universal to all businesses, others are not and depend on numerous factors such as employees, your industry, your locality, etc. Therefore, professional counsel is strongly recommended during this phase of a new business start-up to insure that nothing is overlooked.
Will your business have employees?
If so then even if you only hire one employee, you will become subject to an array of registration and filing requirements such as:
1. Obtain a federal employment identification number by filing IRS form SS-4. This was discussed above. This number will be required for the reporting of federal, social security, medicare and federal unemployment taxes.
2. Register with your state and local government for withholding taxes.
3. Register with your state's unemployment department for payment of unemployment compensation taxes. These taxes get remitted to your state's unemployment compensation fund and are used to provide short-term relief to workers who are laid off.
4. Setup a payroll system to withhold taxes and make the tax payments to federal, state and local tax agencies. However, given all the various reporting requirements and laws associated with payroll, as a matter of practice I strongly encourage small businesses to outsource their payroll processing and filing requirements with one of the payroll processing companies who will also handle all of the registration setups and necessary forms for you.
5. Get the required worker's compensation insurance setup for your employee.
6. Comply with all the requirements of the Occupational Safely and Health Administration (OSHA).
