Not all businesses make a profit. You can see this phenomenon when you think about the restaurants that have come and gone from your local strip mall over the years. Rather, the identifying characteristic of a business in the United States is that it has an EIN number. If you put resources into a project but don’t report it on your tax return, it is simply an expensive hobby. If you and others make money from your project but do not file taxes for it, it is an organized crime racket. To be a legitimate business in the United States, the project must pay taxes or show exemption from paying them. To do this, it needs an Employer ID Number (EIN).
What Are the Different Types of EINs?
When you apply for an EIN, you must specify the type of entity. For example, you can apply for a corporation EIN or an LLC Tax ID number. There are even EINs for churches, non-profit organizations, estates, and trusts. The process of getting an EIN is the same for all entities. You just have to specify your entity type on your application.
Why You Should Incorporate?
If you incorporate (register your business), you will probably end up paying less money in taxes, not more. Even if you are self-employed, you should still get an EIN for your very small business project. Many entity types have the specific purpose of avoiding double taxation. LLCs and S-corporations are especially popular choices. These entity types are appropriate for self-employed people. They are also appropriate for businesses too small for a corporation to be a suitable choice of entity.
You should incorporate so that your business can operate legally. Doing so will also save you money at tax time.