Small Business FAQ – Opening a Bank Account, Business License and Home Office Income Tax Deduction

What documents do I need to open a bank account for my new business?

Most U.S. banking institutions will require both a Federal Employee Identification Number from the U.S. Internal Revenue Service (also known as a federal tax ID number) and proof of registration with the Secretary of State office in the state where the business is primarily located. Some banks may have further requirements.

Do I need a license for my business?

Maybe yes, maybe no. Many small businesses do not need a specific type of license to operate. For example, if you are a consultant, software developer or website designer, it is unlikely you will need a professional business license. However, most states, counties and cities have licensing requirements for certain types of businesses. Also, many cities, towns, counties and other local jurisdictions have licensing requirements just to operate your business within their borders. Accordingly, you should check with each of your local government offices (state, county, city and town) to see if your specific type of business needs a license. Examples of businesses which need a license are restaurants, construction services, gas stations, movie theaters, health related services, insurance brokers and auto repair services.

I work in my home part time. Can I take the home office tax deduction?

If you operate a business out of your home you may be able to take the home office income tax deduction. This deduction allows you to deduct the cost of a portion of your rent or mortgage, as well as some related costs such as utilities, insurance and remodeling, from your business gross income. However, there are strict requirements to be met to be eligible for the deduction. For example, you will not qualify for the deduction if you use your office part for work and part for personal reasons or if you don’t use the space regularly for operating your business.

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