Guides / Business Strategies
Starting a Business? 3 Things You Must Know
Before the logo, the website, or the grand opening, three administrative steps determine whether your new business is actually ready to hire, pay taxes, and operate legally.
In this guide
Get your EIN first
An Employer Identification Number, also called a Federal Tax Identification Number, is the first thing most new businesses need, since a long list of other forms and applications require it before they can be filed. The fastest way to get one is through the IRS website, which issues the number immediately, or by phone. Applying by fax or mail still works, but generally takes one to two weeks to process.
One quirk worth knowing: the IRS limits applicants to one EIN per responsible party per day. If you're setting up more than one entity, plan your timeline around that.
Register your state tax accounts
Once your EIN is in hand, the next step is establishing accounts with your state for payroll tax withholding, unemployment insurance registration, and sales tax collection if your business sells taxable goods or services. These are separate registrations from your EIN, and each state has its own process and timeline, so it's worth starting them as soon as your EIN is issued rather than waiting until your first payroll run is due.
Set up payroll recordkeeping correctly
Payroll reporting and recordkeeping can become time consuming and expensive quickly if it isn't set up correctly from the start. Almost all employers are required to transmit federal payroll tax deposits electronically, so it's worth confirming your process handles that before your first pay date.
For each employee, keep a personnel file that includes the employment application along with two forms in particular. Form W-4 is completed by the employee and used to calculate federal income tax withholding, and it also captures basic information like address and Social Security number. Form I-9 is completed by you, the employer, to verify that each employee is legally authorized to work in the United States. Both need to be on file before or very shortly after an employee's start date.
Don't skip the structure question
Everything above assumes you already know what legal structure your business will take, since your EIN application, state registrations, and payroll setup all depend on it. If you haven't settled that question yet, it's worth pausing here first.
Related guide
See our guide on Form of Business Organization: Which Should You Choose? for how to weigh a sole proprietorship, partnership, corporation, or LLC before you file anything.
Frequently asked questions
Do I need an EIN even if I don't plan to hire employees?
Not always, sole proprietors with no employees can often use their Social Security number instead. But most other structures, and any business planning to hire, need an EIN, and many banks require one to open a business account regardless of structure.
How fast can I actually get an EIN?
Applying online through the IRS website is immediate. Phone applications are also fast. Fax and mail applications generally take one to two weeks.
What happens if I skip state registration and just start operating?
You risk penalties, back taxes, and interest once the state catches up, plus potential complications with your ability to collect sales tax properly or claim unemployment insurance credits. It's a step worth doing before your first sale or first payroll run.
Is Form W-4 or Form I-9 more urgent to collect?
Both are required, but Form I-9 has a hard federal deadline, generally within three business days of an employee's start date. Form W-4 should be collected before or on the first day of work so withholding is calculated correctly from the first paycheck.
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Schedule a consultationThis guide is for general informational purposes only and is not tax, legal, financial, or investment advice. It does not cover every situation or exception that may apply to you. Consult a licensed professional before making decisions based on this information.