Do I need a Federal Employer Identification number?
- Your business needs an EIN if it has employees, has a Keogh Plan, or files one of the following tax returns: excise, fiduciary or alcohol, tobacco and firearms. A sole proprietor with no employees and none of the other items listed above may still need an EIN for fraud protection, contracts procurement and some loan programs. For more information on how to apply for a federal EIN, visit the IRS.gov website.
Do I need a state tax ID number and how do I obtain one?
- All employers are required to have a State withholding number. This number is used to identify and deposit State of Georgia income tax withheld from employee checks. Visit the Georgia Department of Revenue website for more information. All employers are also required to have a Georgia Department of Labor number in order to pay State Unemployment Insurance on behalf of their employees. Applications are available on the Georgia Department of Labor website or through your local Department Of Labor office.
What is the self-employment tax? Do I have to pay it?
- Sole proprietorships that report a profit on the IRS Schedule C are required to pay self-employment tax on that profit. The self-employment tax rate is 15.3 percent of the profits of the business (the same as the total of the employer and employee’s Social Security and Medicare contributions). Sole proprietors are not subject to IRS Form 941 withholdings, but they may be required to make deposits of estimated federal and state taxes based on the profits of the business.
Are there local business taxes?
- All businesses operating in Georgia are required to pay property (ad valorem) taxes on real and personal property of the business. Property taxes are assessed and collected by individual counties. The Georgia Department of Revenue website has links to local tax offices through the State Property Tax Division.
Do I need to collect sales tax?
- Yes. If you sell or rent tangible items to the final consumer, you must collect and remit sales and use tax. There are certain types of sales which are exempt. For more information, see the Georgia Department of Revenue website.
How do I find a good CPA?
- To find a good certified public accountant (CPA), ask the professionals in your area who rely on using financial statements produced by CPAs. For example, your local bankers, attorneys, successful business owners or SBDC consultants should be able to supply you with several excellent referrals. Then you should interview several CPAs to determine which one can communicate effectively with you as well as negotiate a price you are willing to pay for the accounting/tax services needed to operate your company. It is a good idea to obtain an engagement letter from the CPA that includes the services to be provided and the costs of the services.
What business expenses can I deduct?
- As a small business, the types of expenses that are deductible are very important to consider. The Internal Revenue Service states that in order for an expense to be deductible, it must be ordinary and necessary in conducting the business. There are many rules as to the documentation that must be provided to maintain the deductibility of an expense. For assistance in clarifying these rules, seek assistance from your local Small Business Development Center consultant.