Assuming you are a resident of the state (a resident) and are looking to start your business.

The first step is to obtain the ITIN number; however, if you already have a social security number, you can skip to the second step.

What is an ITIN?

An ITIN, or Individual Taxpayer Identification Number, is a tax processing number available only to certain non-resident and resident aliens, their spouses, and dependents who cannot obtain a Social Security Number (SSN).

In general terms, an ITIN is issued by the Internal Revenue Service (IRS) to individuals who are required to have a U.S. taxpayer identification number but do not have and are not eligible to obtain an SSN from the Social Security Administration (SSA).

An ITIN, starting with 9, has nine digits and is formatted like an SSN (i.e., 9XX-7X-XXXXXX).

How to obtain an ITIN?

The easiest way to obtain an ITIN is to complete a tax return. If you have income from sources outside the U.S. and do not have a social security number, you will need an ITIN to file your taxes. The IRS states that the W-7 application for an ITIN should be submitted along with your tax return (Form 1040), and once it is processed, you will receive your ITIN.

You can also apply for an ITIN by mail or at a local IRS office. This process can take up to 6 weeks. When using by mail or in person, you must provide original copies of identity and foreign status documents that meet the IRS requirements. These documents include:

• A valid passport;
• An original or certified copy of your birth certificate or
• A national identification card with your name, photograph, address, and date of birth.

What is the cost of an ITIN?

The cost of obtaining an ITIN varies depending on the companies or organizations that help facilitate the process, with fees ranging from $150 to USD 295.

Who can obtain an ITIN?

U.S. tax law requires taxpayers to provide an identification number so the IRS can process and account for tax returns and payments. Suppose you are not eligible for a Social Security Number. In that case, you must provide an alternative taxpayer identification if filing a U.S. income tax return or claiming any refunds or credits based on income tax paid or other statutory reasons. Applicants for an ITIN include:

• Non-U.S. citizens who cannot obtain a Social Security Number (SSN) must pay taxes to the U.S. government.
• Individuals who do not have a Green Card or have not obtained residency visas are still required to pay taxes to the U.S. government.
• Green Card holders, typically immigrants, who have income in the U.S.
• Dependents or spouses of legal U.S. citizens or Green Card holders with income in the United States.
• Dependents or spouses of non-resident aliens who have income in the United States.

How long does it take to receive my ITIN number?

You will receive a letter from the IRS assigning your taxpayer identification number usually within seven weeks if you meet all the requirements and qualify for an ITIN and if all steps have been completed successfully.

Now, the second step to start your business is choosing the best legal structure for you.

What are the other legal options?

Other legal options to start your business include:

• Creating companies such as LLC Limited Liability Corporation.
• Creating companies as Small Business Corporations.
• Opening companies as Sole proprietors.
• Opening companies as DBAs (Doing Business As).

What are an LLC, S Corp, Sole Proprietor, and DBAs?

An LLC is a business form that helps enterprise members avoid entire personal liability for business obligations. LLCs typically have only one owner or can also belong to several others, as owners of an LLC business are called members. In this model, all members are considered self-employed professionals.

The S Corp business model, or Small Business Corporation, is a tax classification that protects businesses from being double-taxed. Essentially, S Corps are business operations where profits, corporate income, losses, and tax deductions pass through to their owners to declare on their income tax returns.

Sole Proprietor businesses are owned and operated by one person and have no legal distinction between the owner and the business entity.

DBAs, or Doing Business As are commercial entities operating under a name that is not their legal name. DBAs are also called “fictitious business names,” “assumed business names,” or “trade names.”

What are the main differences and advantages of S Corp, LLC, Sole Proprietor, and DBAs?

The main benefit of an S Corp is that, as the owner, you can “pay” yourself a “salary” and have the remaining income as distributions that are not subject to income taxes.

The main benefit of an LLC is that after paying profits to all business members, you can avoid paying taxes by choosing the same tax form as an S Corp in your tax return.

The advantage of creating a Sole Proprietor business is that it has a lower cost to form an individual company than other forms of interaction. It is considered a more straightforward form, as there are not as many rules and formalities to comply with or declare.

The advantage of running a business as DBAs is simply a trade name; it does not have legal benefits or help cut tax costs like other models. However, its main advantage is that it lends credibility to your business and brand and provides privacy for owners who do not want to use their real name when they prefer to remain anonymous.

What is the difference between S Corp and C Corp?

As mentioned earlier, there are two types of corporations: S Corp and C Corp. The main difference is taxes and ownership. Here’s how they differ:

C Corp

C Corps are corporations that are taxed separately from their owners. They are owned by shareholders who elect a board of directors and officers to manage the company. This type of company structure is ideal for large companies with many shareholders, but due to how it is taxed, there are better choices for small businesses.

S Corps

An S Corporation starts as a C Corporation but agrees to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code. As a result, income, losses, deductions, and tax credits pass through to the shareholders each year. Shareholders pay taxes on their returns based on their proportional share of the company’s profits or losses. The company itself does not produce any federal income tax on its earnings.

Should My LLC Be an S Corp?

First and foremost, it’s important to remember that the decision between an LLC and an S Corp, in most cases, will come down to personal preference. While there are some legal considerations to consider when deciding how your business will be structured (we will address these considerations shortly), creating an LLC or S Corp gives your business a separate legal entity from yourself as an individual. Although the differences between these two entity types are numerous, there is no one-size-fits-all answer as to which one you should choose for your business.

Does My LLC Need to Obtain an EIN?

Suppose you are opening your business as an LLC. In that case, you may also be wondering if it needs to obtain an EIN, also known as an Employer Identification Number, issued by the Internal Revenue Service of the United States. Businesses use the EIN for tax purposes as well as non-tax purposes.

Therefore, your LLC must obtain this tax number if it has employees or is required to report employment taxes. LLCs with a single member that are disregarded entities (meaning they are treated as sole proprietorships for tax purposes) generally do not need EINs.