Recently, while perusing the web for services offered to small business owners, I came across a company that offered, as one of their services, the application for and procurement of an EIN (Employer Identification Number — commonly known as a “tax ID”) for their clients. Their charge for this? $150. Such a charge for such a service is, in no uncertain terms, ridiculous. There are a lot of tasks to do and a lot of decisions to make and a lot of things to consider when forming a small business. For some of these, professional advice is well worth the price of admission. When it comes, however, to the act of requesting a number the government so that your business can properly identify itself for taxation purposes, anything other than a nominal charge is probably the sign of a charlatan. There is no doubt that getting your EIN is important: you definitely need it if your going to hire anyone and you probably need it just to start a bank account for your business. Your EIN application may also include some tax considerations for which professional advice is reasonable. Just don’t let anyone charge you for the actual act of applying for an EIN for you until you’ve seen for yourself how the process works. See it for yourself if you’ve got 3 minutes: IRS EIN Application

Good luck and please remember the information here is very general and may not apply to your specific situation. Nothing here should be considered legal advice. For information on your situation, contact your lawyer or the appropriate government agency.

If you’re looking to start a business, chances are one of the first steps you’ll take toward making your business official is selection of your business form, or “entity”. There are a number of business entity options – and most will be familiar to anyone who is considering starting a business. Some of the common options are: sole proprietorship, partnership, limited liability company (or LLC), and corporation. As your business moves from the conceptual phase into implementation and growth, your selection of business entity becomes increasingly important in defining your relationship to the company and carries a number of important financial implications, including potential liability for company actions, taxation, and fundraising.

Entity selection depends on a number of factors. Some of the more common considerations are:

1. Acceptance of /aversion to personal liability

Avoidance of personal liability is often considered the most important consideration in business law. Without proper planning, your personal assets (house, cars, bank accounts, etc.) could be used to satisfy a debt owed by your business. This can go beyond expected business debts – even legal judgments and settlements, or regulatory penalties or fines assessed against your company may become your responsibility if you do not organize the business in a way that can shield you from personal liability. The issue of personal liability is not all doom and gloom – there are relatively simple and inexpensive ways to limit your liability. Many common business risks can also be insured. The important thing here is that you carefully consider the implications of your entity choice on your level of personal liability.

2. Desired tax treatment

The issue of tax treatment goes far beyond that of how much of your profits you will have to share with various government entities. Tax treatment is a large and significant topic — and one that deserves special attention. Consult with an accountant or tax attorney on the implications of taxation on your choice of entity.

3. Costs of formation and administration

Different business entities come with different filing and administrative requirements. Some can be quite expensive and time consuming, some are practically free. A sole proprietorship, for instance, is pretty much automatic and, at base, carries administrative requirements no more burdensome than those of running the rest of your life. A C-Corporation, on the other hand, generally brings with it significant up-front costs in the form of legal and planning fees, as well as ongoing costs of running and documenting meetings, keeping up with filings, finances and other administrative overhead. SO why bother with a corporation? It offers significant advantages when it comes to many of the other considerations discussed here. The good news here is that you can generally move from the low cost/low maintenance end of the spectrum to the more expensive side as business needs and finances dictate.

4. Financing

If you plan to raise money for your company by any means other than organic growth, your choice of business entity will probably matter a lot. Your specific needs will depend on how you intend to raise money, how much money you intend to raise, your financing sources, and whether you will be financing via debt or equity, among other things. Most importantly, your funding source will probably have its own requirements of your business, including acceptable entity choices. Fundraising, and its implications on entity choice, is a huge topic that is best left for another time and place. Suffice it to say for now that if you are looking to raise outside money in any way from any source, you should organize your business in some form that limits personal liability. To put it more strongly: if you are looking to raise money, have lawyer review your business and fundraising plans before you do anything else. The upfront cost may appear prohibitive, but it is likely far less than the cost of any of the missteps you could potentially make.

5. Survivability

Survivability simply means the ability of the company to continue without its founders. This may not matter to you much when forming the company, but if you are looking to raise money, retire, leave the company to heirs, or otherwise divest your ownership, it will matter a lot. Typically, sole proprietorships and partnerships cease to exist when their founders leave. Corporations and correctly formed limited liability companies will survive the departure of founders.

Working through the above issues should help you in determining the business entity that is correct for you and your business. Be aware, however, that the discussion above provides only a brief outline of each of the areas discussed, and only discusses some of the major issues involved in entity choice. There is a great deal more depth to all of the issues discussed, and other issues you may need to consider. The good news is that very few of the decisions you make when starting your company are set in stone, and most can be changed as needs dictate. Find a good lawyer and tax adviser if you haven’t already — the services they will provide will prove invaluable to your company as it grows.

Good luck and please remember the information here is very general and may not apply to your specific situation. Nothing here should be considered legal advice. For information on your situation, contact your lawyer or the appropriate government agency.

An important aspect of doing business in Missouri that often gets little attention until late in the planning phase is sales tax. In Missouri there is currently a base sales tax of 4.225% imposed on the sale of all “tangible personal property” and taxable services. Note that the 4.225% is just the state of Missouri’s cut — counties and cities may tack on their own additions to that rate.

Fortunately, as long as you’re collecting the appropriate amount of tax, many of the potential administrative headaches are diminished because you remit all collected sales taxes to the MO Department of Revenue, which then forwards the appropriate amounts to any city or county that gets a share. So the trick is making sure you collect the right amount of sales tax and apply it to the proper sales.

Determining the amount of sales tax is relatively simple. When you file for your sales tax registration for your business location(s), the state will let you know your rate. If you’d like to know the rate for a particular location, you can look it up here or print out a full rate card for your location.

Once you know your rate, it’s just a matter of making sure that it is properly collected on each taxable sale. If you are selling physical items, other than food, to end consumers, you can almost be assured that the sale is fully taxable. Note that sales of certain services are taxable and that certain food items are taxed at a lower rate. If you have questions about the appropriate tax for an item, check with your lawyer, or with the Missouri Department of Revenue.

The actual mechanics of collecting the tax on each sale are dependant on the specifics of your POS system, so check with your POS system vendor to make sure that sales tax is being collected appropriately.

For more info on handling the Missouri sales tax, you can check out these resources:

General info/FAQs

Info on taxability and exemptions

Forms for sales tax registration

Good luck and please remember the information here is very general and may not apply to your specific situation. Nothing here should be considered legal advice. For information on your situation, contact your lawyer or the appropriate government agency.