Starting a Business?- The IRS has a new process to obtain an EIN

           

         New businesses are no longer required to file a Form SS-4 with the Internal Revenue Service to obtain an Employer Identification Number (EIN).  Instead, you may complete the more user-friendly, interview-style application found on the IRS website.  By completing the online application, you will receive an EIN immediately to use for the purposes of opening a bank statements, applying for business licenses, and filing a tax return by mail.

             Some people cannot use the new online application.  If you are a third party filing the application on behalf of the business owner, the business owner must first complete a Form SS-4 and the third party must keep the application on file.  Single-member LLC’s with employees where the owner is an individual who does not already have a sole proprietor EIN cannot use the new application.  Likewise, if the business was incorporated outside the United States, the new application is not available.             If you fall into any of the excluded categories, or are a traditionalist, you may still request an EIN by mailing a completed Form SS-4 to the IRS.  To access the online application, click here or contact our law firm for assistance.

From Entrepreneur to Employer

The move from Entrepreneur to Employer is a significant milestone in growing a business. In most successful business ventures, there comes a point when the owner realizes he can’t do everything on his own.

Many companies have found that the idea of working with an independent contractor, rather than hiring an employee sounds promising.  After all, businesses don’t withhold Federal, State, or Social Security taxes, or pay unemployment or workers’ compensation insurance for independent contractors.  They also don’t need to offer benefits like vacation or health insurance.

Caution is recommended, though.  Even if both parties agree that the arrangement is an employer/independent contractor one, several state and federal agencies may disagree, and a business owner may end up paying all required employment taxes, wages owed, unemployment tax and benefits, or workman’s compensation, PLUS the possibility of penalties, interest, attorney fees and even potential criminal sanctions.  Each agency has it’s own reason for ensuring that workers are classified correctly – the IRS want to make sure that taxes are being paid correctly, the Department of Labor wants to make sure that workers are being compensated correctly, state Unemployment and Worker’s Compensation agencies want to ensure that workers can receive the benefits that they are entitled to, and each agency has its own test to determine whether a worker is an employee or independent contractor. The one thing all the agencies have in common, though, is the willingness to impose penalties on companies who misclassify employees as independent contractors.

So how can you know for sure if your independent contractor is classified correctly? Although each case is determined individually based on the facts surrounding the situation, a decision can generally be made by looking at the employer / worker relationship and where the control lies. If a business dictates “how, where, and when”, the worker is most likely an employee. If the business perceives itself to be a “client” of the worker, it’s more likely to be an employer / independent contractor relationship. Again, since each case is determined on an individual basis, it’s important that an employer analyze the situation for which he is hiring the worker carefully.

How can Hippo & Fleming Law Offices help?

• Our attorneys can help you analyze the relationship between your business and independent contractors to make sure you are in compliance.
• Our attorneys can consult with you before you make your first hire to analyze your workforce needs.

Questions? Contact our office for more information.