This is one of the most important steps that could impact the entire future of your new business. Take your time before applying for an EIN with the Internal Revenue Service. Severe adverse tax consequences could impact the future of your entity.

Name selection. If you choose a name with Corp, or Inc, the default entity will likely be a C Corporation. Taxpayers almost always do not intend on being C Corporations.

If you choose LLC and you are a sole owner it will most likely default to schedule C on your 1040.

In addition, if you answer questions indicating that you will have payroll, and you very well could, it will trigger the filing of payroll forms typically 940 and 941 with automatic filing dates required, which in turn trigger Colorado state withholding filings, Colorado Department of Labor and Employment, and possibly the Denver Head Tax. In additional, it could trigger worker’s compensation insurance.

Save the letter you get from the IRS CP 575 A for the life of your business.

Tax Tips:

Avoid Corp or Inc unless you know exactly what you are doing
Be prepared to set up State and local payroll accounts if you have employees
Most LLC’s will be on schedule C of your 1040, or form 1065 if you have more than just you as a partner