How to Register as an Employer and Get State Tax ID

Introduction

Starting and sustaining a small business takes work. Don’t let the complications involved in tax rates, minimum wage laws, state labor laws, and retirement programs, and workers’ compensation hold you back.

This step-by-step guide can help small business owners and entrepreneurs who want to learn about state employer registration guidelines.  

Key Takeaways

In this post, we’ll cover how to:

• Confirm business registration with your state.

• Apply for a Federal EIN (Employer Identification Number) from the IRS before hiring employees.

• Register as an employer with state agencies and obtain a state tax ID.

• Set up a state unemployment insurance account.

Getting Started: Business Registration vs Employer Registration

Before you hire employees, make sure your business is legally registered with the state. Business registration creates your company as a legal entity, while employer registration sets you up to handle payroll taxes, unemployment insurance, and new hire reporting.  

Both are important, but they serve different purposes in your small business journey.  

Step 1: Business Registration

When forming an LLC, corporation, or partnership, one of the first steps usually includes registering your business with the state. This establishes your business as a legal entity in your state.

Depending on where you’re located, you’ll register your business through the Secretary of State or another business bureau or agency.  

You can get information on where to register in your state from the Small Business Association.

Business entity formation can help offer personal liability protection by creating a separate legal entity that can protect personal assets from business-related debts.

Registered businesses often have access to a broader range of tax deductions and credits, that can help reduce tax liability. They may also have access to business loans and lines of credit that unregistered organizations may not.

Step 2: Federal Employer Identification Number (EIN)

An EIN is a federal tax ID number required for payroll tax filing and other business activities. You'll need this to help meet your small business tax obligations and:

• Pay federal taxes

• Open a business bank account

• Hire employees

• Apply for business loans

You can apply for an EIN online using the IRS assistance tool. It is free to apply for an EIN directly from the IRS.  

Step 3: Employer Registration

Most states require employer registration when you hire employees, even just one. This covers:

• Setting up state tax accounts for withholding income taxes.

• Obtaining a state tax ID for filing payroll taxes.

• Registering for unemployment insurance.

• Facilitating new hire reporting.  

A state tax ID is separate from your federal EIN. It’s used for:

• State income tax withholding

• State payroll tax filing

The requirements and processes vary by state, so make sure to check your state’s official site. Take time to check your state's laws regarding income taxes and employment taxes to determine if you need a state tax ID.  

Why Register as an Employer?

Registering as an employer helps you avoid penalties and sets you up to:

• Pay federal and state payroll taxes

• Report new hires

• Provide unemployment insurance coverage

Step 4: Create an Unemployment Insurance Account

Most states require an Unemployment Tax ID to pay unemployment taxes on behalf of your employees. This is not the same as your state income tax number.

• Federal Unemployment Tax Act (FUTA): Applies nationwide.

• State Unemployment Tax (SUTA): Paid to the state where your employee resides.

• Tip: If you pay state unemployment taxes on time, you may qualify for a FUTA credit of up to 5.4%, reducing your net FUTA rate to 0.6%.

Additional Steps

• Verify state-specific requirements and deadlines.

• New hire reporting: Required by all states.

• Employee forms: Collect Form I-9 and W-4 from each employee.

• State income tax: Some states require additional filings based on business type and structure.

How SurePayroll Can Help

Managing payroll taxes can be complex. SurePayroll® By Paychex can help simplify small business payroll setup and payroll processes by:

• Calculating and depositing state and federal payroll taxes.

• Handling Social Security, Medicare, FUTA (Federal Unemployment Tax Act), and SUTA (State Unemployment Tax Act) filings and deposits.

• Preparing W-2, 1099, 940, and 941 forms.

Employer Registration Checklist

• Confirm business registration

• Apply for a Federal EIN

• Register as an employer with your state and obtain a state tax ID

• Set up unemployment insurance account

• Report new hires

• Collect I-9 and W-4 forms