Setting up a business can be a confusing and complicated process. Every day at Justworks, we help companies do just that: set up their businesses compliantly. Before you open your doors and make way for all of your amazing customers, make sure you understand the fine print and complete the items below. Have a notebook handy (or bookmark this page) and get ready to learn the fundamentals of setting your business up right. Let’s get started!
Set up an EIN
An Employer Identification Number (EIN) (also known as) a Federal Tax Identification Number, is used to identify a business entity. EINs are issued for the purpose of tax administration. Anyone who has started a new business or hired or will hire employees is required to have an EIN. Once you’ve successfully applied, you’ll receive the number along with an SS-4 confirmation letter, which you should retain for your records.
Get SUI # and set-up withholding
SUI stands for State Unemployment Insurance. Unemployment insurance is an employer-funded program required by both state and federal law. Unemployment insurance pays unemployed workers benefits while they are looking for work.
There are two components to how SUI tax is calculated: “Wage base” and rate. Wage base is the maximum amount of earnings that can be taxed in a given calendar year. This is established on a per-state basis and may change from year to year. Your SUI tax rate is determined based on how many of your former employees have filed an unemployment claim in the past. New companies are taxed at a “new employer” rate and then the rate is updated on an annual basis by the state based on unemployment claim activity. New employer rates generally range from 2-4%.
How: Each state has its own requirements. For example, the New York State Employer Registration Unemployment Insurance, Withholding, and Wage Reporting (NYS100) is for businesses and household employers to register for an Employer Registration Number.
What you’ll need: an e-mail address and your EIN.
Set-up Workers' Compensation Insurance
Workers’ compensation insurance protects employers and employees against financial losses in the case of injury. Not carrying this insurance for employees is a crime and the business owner can be prosecuted for a misdemeanor or felony. Worker’s compensation insurance is mandatory for most businesses in every state except Texas. This insurance is the responsibility of the employer.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.