Business Filing Requirements

by Morrisa Barfoot Summers, CPA

The many and varied filings required of businesses are often the bane of their existence. How does one go about the business of doing business while satisfying all the differing filing requirements of each locality with which it is associated? The following is a summary of the major required business filings. Please note that the focus of this article is on those businesses operating in the state of Tennessee; requirements for other states will vary.

Initial Required Filings

The initial step for businesses establishing themselves as domestic corporations (ones incorporated in the state of operations) is to file a charter and Form SS-4238, Application for Certificate of Existence/Authorization. If the business is considered a foreign corporation (incorporated in a state other than that in which it will operate) then Form SS-4431, Application for Certificate of Authority, should be filed. All of these are filed with the secretary of state. Domestic limited liability companies (LLC) must follow similar procedures with domestic LLCs filing articles of organization and Form SS-4238, Application for Certificate of Existence/Authorization, while foreign LLCs apply for Form SS-4233, Application for Certificate of Authority. Again the secretary of state is the entity with which to file. The situation is much the same for limited liability partnerships (LLP). Domestic LLPs file Form SS-4238, Application for Certificate of Existence/Authorization, and foreign LLPs file Form SS-4486, Notice of Registration of Foreign Limited Liability Partnership. Expect to pay fees at the time of filing these various forms. In order to comply with tax registration requirements, such as sales or franchise & excise taxes, Form RV-F1300501, Application for Registration, should be filed, regardless of the type business entity involved.

Any corporation, partnership or LLC must also obtain from the federal government an employer's identification number (EIN). If a sole proprietor intends to hire employees, then this individual must also have an EIN. To obtain an EIN, Form SS-4, Application for Employer's Identification Number, must be submitted. This number will become the identifier for the business on all future tax filings.

The next step is to acquire a state unemployment account. In Tennessee, that means filling out Form DES 210.1, Report to Determine Status. This form is only necessary when a business will have at least a single employee who is either paid at least $1,500 or employed at least 20 weeks. Both situations are viewed within a calendar year. New employers receive a rate of 2.7 percent, unless they are classified as part of industries deemed to be at high risk of unemployment. Rates are initially reviewed after three years and annually thereafter.

Another step in the initial registration phase is to apply for a business license in its specific locality of operations - the city and/or county in which the business is located. Note that registration must be made in each locality. This area becomes especially important if the business has operations in the same county, but within different cities. The business license needs attention beyond the initial phase. If the company moves or opens other locations, it will not need another EIN, but will require different or additional business licenses.

Once a business has completed all its initial filings and settled into the business of doing business, there are numerous filings which must be considered on a regular basis. These can be separated into payroll, income and miscellaneous categories. There are federal, state and sometimes local requirements in all areas.

Payroll-Related Filings

The area of payroll returns, including its related deposits, is the area businesses deal with most frequently. Businesses need to have every employee fill out Form W-4, Employee's Withholding Allowance Certificate, and Form I-9, Employment Eligibility Verification, upon hire. While these forms are maintained in the company files, all new hires must be reported to the state government within 20 days. In the state of Tennessee, a private company handles this function. This process can be done by phone, fax, e-mail or ?old-fashioned? mail.

Employers are required to withhold taxes from employees. Based upon their Form W-4 information, federal income tax is withheld dependent upon frequency of pay, income and number of deductions. Federal Insurance Contributions Act (FICA) taxes, commonly referred to as Social Security taxes, are comprised of two parts: Medicare and Old Age and Survivors & Disability Insurance (OASDI). The OASDI portion is 6.2 percent and the Medicare portion is 1.45 percent. The OASDI portion is paid on the first $94,200 in wages in 2006, but the Medicare portion is paid on all wages. Employers must match the FICA taxes withheld. These taxes are deposited with a financial institution in the time frame designated by the employer's deposit status. Most employers will be classified as either semi-weekly or monthly depositors. This status is determined by prior payroll tax liability and re-calculated each year. Semi-weekly depositors use the payroll check date to decide the deposit deadline, either Wednesday or Friday. Monthly depositors have until the 15th day of the following month to make their deposit. As a general rule, semi-weekly depositors should be using the Electronic Federal Tax Payment System, while monthly depositors may still use the Form 8109, Federal Tax Deposit Coupon.

New in 2006 is the Form 944, Employers Annual Employment Tax Return. If the annual tax liability is expected to be $1,000 or less for withheld income tax, social security and Medicare tax the business qualifies for filing the Form 944. The IRS will mail notification letters stating the business qualifies and will not recognize the Form 941 if filed unless notified and an updated letter is sent. Form 941, Employer's Quarterly Federal Tax Return must be filed if you do not meet the requirements for the Form 944. This return is filed quarterly, based on a calendar year with quarters ending in March, June, September and December. Form 941s are due by the last day of the month following the end of the quarter.

Federal unemployment tax is reported on Form 940, Employer's Annual Federal Unemployment Tax Return. This return is due by the last day of January of the following year. The rate is 6.2 percent with a credit of up to 5.4 percent, (effective rate 0.8 percent), allowed if state unemployment taxes have been timely and completely paid. Deposits must be made quarterly anytime the cumulative liability reaches $500. These deposits are handled in the same manner as the deposits for Form 941.

Annually, employers must present Form W-2, Wage and Tax Statement, to each employee. This return provides information on wages, taxes withheld, and other items such as 401(k) deductions. The deadline to employees is Jan. 31, with copies to the government, accompanied by Form W-3, due by the last day of February.

State governments also require payroll-related filings. Unemployment taxes must be reported and paid on Form DES 220-5, Employer's Quarterly Contribution Report. This return is due by the last day of the month following the end of the quarter. All amounts due are paid with the return. While Tennessee does not have a tax on wages, most other states do. For these states, businesses must also remit and report state income tax withheld from employees. Due dates vary from state to state.

Income Related Filings

Another broad area of required filings pertains to taxes based on business income. Specific due dates and returns depend upon the type of business entity involved. If the business is a corporation, either "C" or "S," returns are due by the fifteenth day of the third month after the end of the year. In the case of a business using a calendar year, this means March 15. C corporations use Form 1120, U.S. Corporation Income Tax Return, while those with S status use Form 1120S, U.S. Income Tax Return for an S Corporation. Extensions can move the due date forward by six months. In most cases, estimated payments should be made during the tax year.

If the business is a partnership or a multi-member LLC, the return used is a Form 1065, U.S. Partnership Return of Income. This return is due by the fifteenth day of the fourth month after the year-end, usually April 15. Extensions of up to six months may be requested for this return. There is no federal income tax due on a partnership, so no estimates are required of the entity. Instead, each partner receives a Schedule K-1 reporting his/her share of income. Each partner should therefore include partnership income in calculating his/her individual tax estimates.

Sole proprietors and a single-member LLC report business income on their personal tax return, Form 1040, U.S. Individual Tax Return. A Schedule C, or C-EZ, (Net) Profit or Loss from Business, is used. The deadline then is the same as for the remainder of the Form 1040, namely April 15. Extensions are also the same as for the individual return. Again, this income should be considered in making estimates.

Tennessee taxes business income through the Form FAE 170, Tennessee Franchise and Excise Return. This return breaks the tax into two parts, one based on capital invested and the other on income. Franchise and excise tax returns are generally required of all business entities: Corporations, S corporations, LLCs and limited partnerships. The due date is the fifteenth day of the fourth month following the end of the year. As with federal income taxes, estimated payments may be necessary.

Miscellaneous Filings

Finally, there are those filings which are of a more miscellaneous nature, in that they are less easily grouped. On the federal level, this includes the Form 1099. The varieties of this form are too numerous to be listed here, but the most common is the Form 1099-MISC, Miscellaneous Income. This form is given to vendors providing services in excess of $600, not including vendors which are incorporated. Form 1099s are due to the vendor by the last day of January and to the federal government by the last day of February. Form 1096 serves as a cover sheet.

Another federal filing is the census report. This report comes in a multitude of types. Generally, a census should arrive once every five years. Due dates vary with the type of census report received.

At the state level, the most common of the miscellaneous filings is Form RV-R0000201, Sales and Use Return. Depending on the nature of the business, this return may not be required. Specifics are too many to detail, but generally if a business sells or leases tangible personal property, offers a taxable service, or buys and consumes in Tennessee untaxed merchandise from another state, it must collect and remit sales tax via this return. The rate for sales tax in Tennessee is broken into state and local portions. The state portion is six percent, while the local portion may vary between one percent and 2.75 percent. Timely returns are allowed vendor's compensation of two percent on the first $2,500 as a reduction of taxes remitted. Filing status is either monthly, quarterly, or annually and again is dependent upon the nature of the business. The due date is the 20th day of the month following the end of the reporting period.

Tennessee also requires corporations, LLCs, and LLPs to file annual reports. The due date for these reports is the first day of the fourth month after the year-end. There are varying fees associated with these annual reports.

On the county or city level, there are still more filings with which to contend. By the last day of February, businesses are required to submit a tangible personal property schedule. This schedule is basically a listing, by category and age, of all tangible personal property owned or leased. There are no fees due with this report. It does, however, become the basis for determining personalty taxes.

Many businesses will also find it necessary to file a business (gross receipts) tax return. This return is due based upon the state-defined category in which a business falls. Not all businesses are subject to this requirement. Rates are based on whether sales are retail sales or wholesale. Credit is allowed for personal taxes paid within the measured period, which may have no relationship to the business' fiscal year.

Conclusion

The information above is by no means an exhaustive discussion of all required business filings. Many specialized industries, such as restaurants, will find they have other necessary requirements in filings. One such example would be the obtaining of an alcoholic beverage permit. Anyone contemplating a business start-up or the expansion of a current business into a different locality would be well advised to consult a certified public accountant prior to making such a move.

About the Author

Marissa Barfoot Summers, CPA, is a member of the Tennessee Society of Certified Public Accountants.

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