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What’s up, y’all. Welcome to The Shontavia Show, where my goal is to help you start a business based on your life’s vision. This ain’t gonna be your daddy’s business advice. I’m laser focused on entrepreneurship in the 21st century, vision and breaking the traditional mold. If you can get with that, you can get with me, be sure to visit shontavia.com for more episodes, blog posts, and other content. Thank you for listening. The show starts now.

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Hey everybody. I’m Shontavia and this is another episode of The Shontavia Show, where I inspire you to build a business based on the vision you have for your life. Today’s episode is a topic that is about as dry as it comes, tax ID numbers, but tax ID numbers are a necessary part of your business, y’all, and so we are going to talk about it today.

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Let me preface this though by saying I am not a tax lawyer. I am not a tax professional. My goal here is to help you understand how a text ID number works and some considerations for when you should get one for your business. Everybody’s case is different. So if there’s something special or unique or different about you, or if you have really nuanced questions about your specific type of business, you really, really need to find a tax professional, talk to your accountant or somebody like that.

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But let’s get into it because tax ID numbers really do support a lot of the things you’re going to do in your business so long as you’re making money. And I want to make sure you have all the right information and education about that. So a little while ago I interviewed a friend of mine who is also a business law expert. Her name is Carliss Chatman. Shout out to Carliss wherever she is right now.

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She is a dynamic lawyer, dynamic advisor and counselor for small businesses. She is an expert in this space and we talked about the types of business entities and business structures people need and how all of this works with respect to your money and what happens to your money when you operate in a business.

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Carliss has been doing this work a long time. I’ll drop the link to that discussion in the show notes. It has been a really popular video for me and it’s been really popular with my clients who are thinking through a lot of different things and Carliss has been doing this work in the U.S. And around the world. She’s got just amazing expertise and her general opinion–we had about a one hour discussion–her general opinion was that if you are selling anything to anybody at any time, you need a registered business and a tax ID number, and I agree with her.

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I feel exactly the same way and that is because you’re protected from liability if things go wrong and it helps with record keeping when, like every American in this country, you’re filing your taxes, I figured it would be a good idea to take a step back and have a shorter conversation on the show and through the podcast about tax ID numbers and how you can get one for your business and when you need one.

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Getting a tax ID number is pretty straightforward. It’s a lot more straightforward than people think, but we’re going to start from ground zero assuming you know nothing at all about this stuff.

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So once you’re committed to creating a business, the first thing you have to decide is, or one of the first things really, is where you’re going to incorporate and whether you’re going to incorporate or register. So incorporate or register your business with the secretary of state or the equivalent office in the state that you choose.

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If you decide to file an application to register or incorporate your business as I think you should, it shouldn’t take long for you to hear back about whether your application is approved. So in the state where I live in South Carolina, it’s all done online and you hear back automatically if there are no issues with your application, unless you’ve made some glaring error or whatever, voila.

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At that moment you are now the owner of a business. You’re officially a registered business owner and once you do that, the next step is pretty straight forward in getting a tax ID number. You also see that referred to as a tax EIN or a TIN tax employer ID number. And you get that from the IRS.

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So you might hear me say tax EIN or tax ID number talking about the same thing. So the tax ID number is kind of like a social security number for business. It lets the IRS know where it needs to go to collect it’s tax dollars. And y’all know the IRS wants its money, don’t play with them y’all. But you do need one to ensure again, that you’re protected from liability through your business and for recordkeeping purposes. And definitely to ensure that you’re not running a foul of any IRS laws or rules that can get you in trouble later.

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So how do you know when you need a tax ID number? Because it’s not required for everybody. There are a couple of different situations where you have to have one, a few different situations where you don’t have to have one. But from my perspective it would helpful to consider having one just about all of the time.

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So let me talk a little bit about what the considerations are and then how you can start to make the decision about whether or not you need one. So a tax ID number is not required if you operate a sole proprietorship. So if you haven’t incorporated or registered your business and you’re just out there operating in your own name, you’re a sole proprietor, you don’t need a tax ID number unless you have employees.

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Same with an LLC. If it’s just you who is registered an LLC with the secretary of state or the equivalent office, you don’t have to have a tax ID number, particularly if you don’t have any employees, you just use your own own social security number as your tax ID number.

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Now this can be a little bit of a challenge. So this happened with me a few months ago. I was speaking at a university and they sent me a form, and the form was like a vendor form or something and I had to give them information because they were going to reimburse me for my travel expenses and they were going to pay me some amount of money.

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And there was a question there that said, you know, if you have an employer ID number or tax ID number, please put that here. Or if you don’t give us your social security number. And they wanted me to email the form back to them, or fill it out online or fax it back to them. So you know, I didn’t want to put my social security number on this form that I’m just going to send back to somebody by email or fax or whatever.

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Thankfully I have a business where, you know, when I travel I do this stuff as part of my business, so I used my, my tax ID number and I didn’t have to share my social security number by email with a stranger.

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So having that tax ID number was really helpful for me in that situation. Even though at that time I was an LLC, just a single member LLC by myself. It’s not so true anymore. I don’t have an LLC anymore, but I did at that time.

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So, if you are a sole proprietor or an LLC with no employees, you don’t actually have to go out and get a tax ID number. A tax ID number is required even if you’re a sole proprietor or not, whether your sole propriety or not, if you have employees, if you have a solo 401k retirement plan or a Keogh retirement plan, if you’re going to buy or inherit an existing business, even if you operate as a sole proprietor, if you buy or inherit a business, you need a tax ID number.

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If you incorporate or form a partnership or an LLC when you have employees, if you file for bankruptcy, you’d need a tax ID number under those sets of circumstances. And like I was saying, even if it isn’t required, there’s some times where you probably still want to have one and I’ll give you just a couple of examples.

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The first was mine where you know, maybe you’re out speaking, you’re going out doing things, even if it’s just you and an LLC by yourself or as a sole proprietor. You don’t want to email your social security number all around. Some other reasons: oftentimes banks require you to have an EIN, a tax ID number before they’ll let you set up a bank account. Sometimes you can’t get a business credit card without a tax ID number. That is more and more the case. It’s also helpful to have a tax ID number when you’re applying for business permits and licenses and you know, keeping that social security number private.

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That is, you know, a big one because you don’t want to be handing out your social security number all the time. You want to protect your privacy.

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Also, and this is something I’ll drop a link in the show notes with the conversation with me and Carliss, another thing you really have to be careful of is not mixing your business money with your personal money. You want to keep your personal funds and your business funds separate for a number of reasons that go a little bit beyond the scope of the discussion here, but definitely in that conversation I had with Carliss that I mentioned. So for other legal reasons, keep your business money and your personal money separate.The tax ID number, will help you do that.

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So again, if you’re a sole proprietor or an LLC with no employees, you don’t have to have a tax ID number. Corporations, partnerships, LLCs with employees do have to have a separate tax ID number and it’s a good idea to do it even when it’s not required.

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So how do you get one? Once you’ve decided you need one or you want one, how do you go out and get one? So the IRS has a website where you literally just go, it takes 15 minutes or less. In fact, you only have 15 minutes from the moment you click that you want to apply for a tax ID number online.

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You just fill out an application online that’s got some questions. And most people I would say, or maybe many, I don’t know about most, but a lot of people feel comfortable doing this on their own, applying for a tax ID number on the IRS website by themselves. There’s some basic questions you have to answer, including your name, the name of your business entity and mailing address when the business started, the type of business you have, there are a few questions about employees, the closing month of your accounting year, what you’re selling…

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And they’re just basic questions like that. And again, it can literally only take 15 minutes. There’s a fee at least as of the recording of this podcast, which is at the end of 2019, you have 15 minutes to complete it and you can’t save the application and come back later.

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So you really have to be ready to do it at that time. Once you do that, within minutes you get an email from the IRS saying, here’s your new tax ID number. You download and save everything and then you’ll get a letter in the mail confirming everything. So this online process is available to all entities with the principal office or place of business or legal residence in the United States and in U.S. Territories. If that is not you, then you can apply online, but there are a couple of other ways fax mail, and if you are, you know, not comfortable with fax and mail, you can actually do it by phone and there’s a form that you fill out.

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I’ll drop a link in the show notes so you can see what it looks like. And just the other final thing to notice, you are limited to one EIN per responsible party per day. Responsible party just means the person who owns or controls the business.

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And that’s it. That is it. Voila. Once you’ve done that, you are well on your way to having a legitimate business. You’ve got a registered or incorporated business, you have a tax ID number.

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If you have questions about this whole concept of tax ID numbers, head over to shontavia.com, leave a comment, ask a question about this episode. You can engage with me and other entrepreneurs who are also engaging on the site. Read more about this topic related to businesses and incorporation and registration and that kind of thing and find other resources. Thanks.

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Thank you so much for listening to this episode of The Shontavia Show. If you enjoyed this episode, please be sure to like, subscribe and leave a comment wherever you’re listening. You can find me on social media everywhere, Facebook, Instagram, Twitter, LinkedIn, and wherever else @ShontaviaJEsq. You can also visit me at shontavia.com to find a transcript of this episode along with other show notes. While you’re there, please be sure to subscribe to my email newsletter.

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The information shared in this podcast and through my other platforms is designed to educate you about business and entrepreneurship and I love to do this work. While I am a lawyer, though, the information I provide is not legal advice and does not create or constitute an attorney client relationship.

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The Shontavia Show is a LVRG Incorporated original. The show is recorded on site in South Carolina and produced at Sit N Spin Studio in Greenville, South Carolina. Original music and sound design is by Matt Morgan and Daniel Gregory. Mixing and mastering is by Daniel Gregory and the video is by GVL Media.