Though it’s rare, sometimes changes to names are made right after EINs are issued.  If you recently received your EIN and have not made any tax filings with the IRS then send your Business Name change request to:  IRS-Stop 343G, Cinicinnati, OH 45999

If tax liability for the EIN has already been determined (i.e. you’ve already filed a tax return for the entity) then there are two ways to noify the IRS of your entity’s new name.

1. When filing a current year tax return you can check the name change box on the entity’s respective form:

Corporations – Form 1120, Page 1, Line E, Box 3
S-Corporation – Form 1120S, Page, 1, Line H, Box 2
LLC (partnership) – Form 1065, Page 1, Line G, Box3.
LLC (sole member) – cannot update name by filing return; must use option 2.

2. If you have already filed the return for the current year, you do not have to wait until next year to change your company’s name with the IRS.  Changing the name of a corporation or an LLC, typically requires an amendment to be filed with the State or country where the business entity was originally formed.  Deliver a filed copy of this amendment, along with a letter informing the IRS of the name change, to the address where you filed your return. Corporations must have the letter signed by a corporate officer, while LLC’s must have the letter signed by a member.

Once you’ve informed the IRS of your new name, you’ll need to let everyone else know you’ve changed your name too.  It’s a good idea to make a list of all the other agencies and companies that you do business with on a regular basis; be sure to include all State and local tax authorities, vendors, suppliers, service companies, banks, etc.  This will help keep you organized during the transition and make sure your mail service is not interrupted. It’s your responsibility to make sure that everyone is on the same page in the new chapter of your company.

• Changing from a corporation to another entity like an LLC or Limited Partnership, or vice versa.
• Incorporating in a new state resulting in a new state charter.
• Merging corporations resulting in a new corporation.
• Changing a sole proprietor to a partnership or other business entity like a corporation, LLC, etc.
• Changing a partnership to a sole proprietor or other business entity like a corporation, LLC, etc.
• Changes to a partnership resulting in a new partnership (i.e. one partner out, a new partner in).
• Changes in business ownership that result in the original EIN applicant no longer maintaining ownership of the company.

Aside from re-organizing a business, most other changes typically do not require a new EIN.    Some examples of changes that do not require a new EIN are:

• You change the name of your business.
• You change the location or add locations.
• You elect to be taxed as an S corporation or you elected on Form 8832 Entity Classification Election, to change the way the entity is taxed.
• A partnership or corporation declares bankruptcy.

These lists are not meant to cover all situations, but do cover number of common changes we see every day here at HBS.  If you are still left wondering whether you need a new EIN, check out the article in the Businesses section at www.IRS.gov entitled, “Do You Need a New EIN?”

Be sure to check out Harvard Business Services new EIN order form HERE. It’s never been easier!

Before you even make your first sale, California Franchise Tax Board says that all corporations and LLCs are required to pay at least an $800 franchise tax if they:

• Incorporated or organized in California.
• Qualified or registered to do business in California.
• Doing business in California, whether or not incorporated, organized, qualified, or registered under California law.

Furthermore, entities are required to pay the minimum franchise tax whether they are active, inactive, or operating at a loss.

Okay, but that still doesn’t define “doing business” in California.  Through 2010, doing business in California was broadly defined as “actively engaging in any transaction for the purpose of financial gain or profit.”  It was a pretty vague definition to say the least.

Starting this 2011 tax year, an entity is considered to be doing business in California if it meets one of the following tests:

• The entity is actively engaging in any transaction for the purpose of financial gain or profit.
• The entity is organized or commercially domiciled in this state. To be commercially domiciled in this state generally means that this state is the principal place from which the trade or business of the entity is directed or managed.
• The entity’s California sales exceed either $500,000 (annually adjusted for inflation) or 25 percent of their total sales. Sales include sales made by an agent or independent contractor of the entity.
• The entity’s California real property and tangible personal property exceeds either $50,000 (annually adjusted for inflation) or 25 percent of their total real property and tangible personal property.
• The entity’s California compensation exceeds either $50,000 (annually adjusted for inflation) or 25 percent of the total compensation paid by the entity.

Though the new definition was written to include the original definition of doing business, I think the added tests make it clear that if you are a corporation or LLC generating income in California or maintaining tangible property in California, YOU ARE DOING BUSINESS IN CALIFORNIA, and should file a foreign qualification there, which we can help you with.

The IRS states that you need to record every deductible mile you drive.  So, unless you want to strap a clipboard to your steering wheel and start writing down the mileage to and from every work destination, you should check out Bonnie Lee’s article, How to Write Off Your Vehicle Expense.  Bonnie Lee is an Enrolled Agent admitted to representing taxpayers in all fifty states at all levels within the IRS.  Her article offers some tips for some basic record keeping that could prove to be invaluable when trying to trace back those “business miles” come next tax season.

To read the full article, click HERE.

At the beginning of October 2010, the IRS sent postcards announcing this change to individuals who filed paper returns last year and did not use a tax preparer or tax software.  The postcards explain how to get forms and instructions for a 2010 tax return, which will be available online in early January 2011 at www.IRS.gov

Here are some useful links to help you find your way around IRS.gov

• Forms and Instructions
• IRS Publications
• Local IRS Offices
• IRS Free File
• Tax Information for Businesses

To read the full press release click HERE.