How to Go Legit with Your Business
How to go legit with your business suggests to me that you are already in business. Going legitimate with an already established business requires different steps than starting a new business. This blog describes what to do when you are already in business and need to legitimize your company.
Because your company is already operating by default, you are a sole proprietor. At this point, you can determine if another business type, for example an S-Corp or LLC, is a better option for you. If you are unsure, then discuss this with a CPA or a lawyer.
Moving forward as a sole proprietor, you can use your social security number, or request an Employer Identification Number (EIN) from the IRS. Applying for an EIN is free. The link to apply with the IRS here. Obtaining an EIN is always a good idea.
You will need to file an Assumed Name certificate usually with your county. An assumed name is also known as "Doing Business As". Each state will have different filing requirements. Check with your county and state agencies,or hire a CPA to navigate the bureaucracy.
This next one is a biggie! When a person is interested in legitimizing their business, they generally have not filed tax returns. If you have not filed prior year’s tax returns, contact a CPA immediately, and have your tax returns filed as quickly as possible. This pertains to federal, state, and local tax filings.
Open a business bank account. You will need an EIN or an Assumed Name certificate to open an account. Maintaining a separate account for your business income and expenses is a must in the eyes of the IRS.
Track your revenue and expenses by categories at least quarterly. Provide this information to your CPA to calculate your estimated tax payments.
Estimate tax payments are due:
April 18, 2022
June 15, 2022
September 15, 2022
January 17, 2023
The exact date changes slightly from year to year. They remain in the same months hovering around the 15th.
Stay current with your business’ filing requirements.
Work with your CPA to build growth, and tax planning strategies.
In summary,
· Obtain an EIN
· Register you Assumed Name
· File prior year’s tax returns
· Open a business account
· Track your revenue and expenses (cash in and out)
· Make estimated tax payments
· Stay current with taxes
· Work with your CPA
Starting this now, at the beginning of a year, is the best time. Organizing and accumulating your income and expenses proactively, is so much better and easier than trying to do it all in the past.