We heard from some friends that you can get a tax i.d. number for a busness you want to start and it is almost the same as a social security number for a person in that the business or tax i.d. number would have a credit score. is this true at all? can you get loans in the name of your business to get it up and running?
2007-02-22 14:50:44 · 5 answers · asked by heather l 4 in Business & Finance ➔ Small Business
You can abosutely get a tax ID # for your business. As far as lending goes, it depends on the type of company. If you are a proprietorship, or partnership, you will not be able to take out loans without personal liability if you default. You will be a signer on the loan. However, a corporation has limited liability to its assets.
However, put yourself in the shoes of the bank. If you are a single person, incorporated, and you ask a banker for $100k or so to start a business with no assets, he's not going to let you borrow money. He wants collateral and some assurance.
So to sum up, you can get a business ID, but as far as borrowing money under that ID, you would need to build up equity in your business for collateral for a loan in order for a bank to really entertain the idea. Personal loans (as opposed to business loans)are the way to go if you need money for a startup.
2007-02-22 15:00:53 · answer #1 · answered by jkersman01 3 · 2⤊ 0⤋
A tax ID is called an Employer ID number. It is issued by the IRS.
You'll also need to file DBA papers in the county in which you intend to do business. In my county, the fee for filing the paperwork is $16. You'll need to do a business name search so as to keep from using someone else's business name, first.
You don't really need an EIN, they call it, unless you intend to have employees and pay wages.
The credit thing goes this way: the DBA (Doing Business As) papers are a matter of public record. There are credit card and other companies who search these records for new businesses in the area and send all kinds of things such as catalogs, credit card applications, and so on to the business address you have on the DBA papers.
There is no actual credit score attached to the DBA process, and the business won't have a credit score until you establish credit in the business name.
A person may qualify for small business loans, but if at all possible, you need to stay away from that and do it all from revenue from the business and from personal funds because interest rates are going to be high and anything you have to pay up front increases your overhead and diminishes your profits.
This is why so many sole proprietorships go under in a couple or three years. They start out by running up a lot of debt and then business slacks off and their income isn't what it was at first, then the creditors come knocking on the door... and they go bust.
Hope this information helps.
2007-02-22 23:01:00 · answer #2 · answered by Peggy K 5 · 2⤊ 0⤋
Go to www.irs.gov and download Circular E.. It will tell you what all you need to know and who to pay it to. The first thing you do is apply to the state to get your EIN number-Employer Identification Number. This number will identify you to the IRS. You will use this number to identify yourself for bank accounts etc. On the other hand you can be self employed and use your social security number. There are benefits both ways. With either you file a schedule C for income tax and the net profit or loss goes thru to your 1040. And then there's dba-doing business as. . .Joe Smith dba Smith's Carpet Service. If you have a good idea and make a good plan you may be able to get help from the SBA-Small Business Association. They can also offer help on getting set up and other things you may need to know. Do lots and lots of reading so that you don't learn the hard way. In Texas there is the Texas Workforce Commission and besides just collecting unemployment taxes, they often have offices set up with many types of help offered. Look for all the free help you can get. Don't hesitate to talk to business owners that you frequent. Everyone will have something to offer you haven't thought about. You don't have to tell them what business you are starting but get pointers on starting a business. Ask them how they got started and what problems they encountered and how they fixed the problems. Hope this helps. . .
2007-02-22 23:09:38 · answer #3 · answered by towanda 7 · 2⤊ 0⤋
You can get your tax ID number online or over the phone from the IRS in about 15 min. Yes it is your business soc security number. It is very hard to get loans for a new business on the business merits alone. Think of getting your tax ID as the birth of a new person. That is how the banks look at it. Who wants to loan money to an unproven person? But you can get loans for your business by signing a personal guarantee (co signing for your business), if you have good credit.
2007-02-22 23:00:23 · answer #4 · answered by Steven S 2 · 3⤊ 0⤋
Yes. The TPINs are assigned to corporations just like SSNs are assigned to individuals. The whole purpose behind the corporation concept is to protect the individuals who run it from liability. So if a corporation files bankruptcy, it does not effect the individuals. So, for that to work, the corporation has to be able to do what individuals do.
2007-02-22 23:03:32 · answer #5 · answered by Anonymous · 0⤊ 2⤋