Lending Library

In 1962, Dun and Bradstreet—a credit company—established the Data Universal Numbering System (DUNS). This unique numbering system links more than 280 million businesses worldwide. 

A DUNS number is a 9-digit identifier that can be assigned to all business types within all industries. Corporations, sole proprietors, nonprofits, and government offices can all use DUNS numbers. 

Learn more about a DUNS number—and how it can help your business. 

Why do I need a DUNS number?

There are many uses for a DUNS number that prove its value. Because there is no cost to requesting a DUNS number, you may want to acquire one now so you have it when the need arises. A few examples of when you will need a DUNS number include:

• If your business wants to pursue government contracts and federal work. 
• If your business is applying for grants through the federal government (especially the US Office of Management and Budget, or OMB).
• If you plan to expand your business globally—and especially if you plan to work with national governments. Some United Nations offices require DUNS numbers when submitting contracts. 

Many American business owners use an Employer Identification Number (EIN) from the IRS as an identifier. While an EIN is useful, it is limited to the United States. A DUNS number can be shared globally, providing greater value as your organization expands. Furthermore, an EIN only identifies the business owner, while a DUNS number identifies the business as a whole.  

How do I get a DUNS number?

You can request a DUNS number from the Dun and Bradstreet Corporation. There is currently no cost to request a number, and the company prides itself on its ability to deliver numbers to companies quickly. You can receive your number in about 30 business days, but the company offers some options to expedite the process. 

If you work for an organization that might already have a moniker, you can use the DUNS number lookup to see if your business is already registered. You can also look up other companies to see if they have registered as well. 

Can I use my DUNS number instead of my Social Security number?

A DUNS number is not a replacement for an EIN or Social Security number (SSN) for lending and application purposes. When you apply for a business credit card or loan, you will need to provide your EIN and possibly your SSN because a business cannot apply for credit, but a business owner—or authorized treasurer—can. 

DUNS numbers serve as supplemental identifiers. To prove your identity, you will need to share additional information. 

Learn when to use your DUNS number.

If you are still unsure whether you need a DUNS number, talk with a business consultant who specializes in your field. They can provide advice as to whether you could benefit from acquiring a DUNS number. 

Because acquiring a DUNS number is free, you may benefit from requesting now—in case you ever need it in the future.

The entrepreneurial traditions of America often idolize individuals who built companies that would ultimately bear their names. We all know about Henry Ford, John D. Rockefeller, and Cornelius Vanderbilt—but can anyone name a single executive who served alongside these leaders? Probably not because there sadly isn’t much room for additional names in the pantheon of success. Triumphs are attributed to the person whose name is on the front of the building, regardless of who is truly responsible for them.

If there’s a benefit to these myths, it’s that young people can easily identify role models. By learning about legendary strategies and innovations, these aspiring business owners can begin to gain their own momentum long before they file for a business license.

But many issues arise from misguided hero worship. It disenfranchises thousands of talented contributors while also lionizing flawed individuals who might not be deserving of such lavish praise. And, most troubling, it continues the centuries-long process of driving a wedge between the elite of business and their employees.

“The gap in wealth in the United States between the ultrawealthy and everyone else has reached its widest point in decades,” reports research by Peter Walsh, Michael Peck, and Ibon Zugasti, a trio of financial experts. “One way to narrow the divide is through the use of worker buyouts, in which ownership of a company transfers from a single person or a small number of people to the workers of the company. Currently, about 10% of Americans hold equity stakes in their workplaces. By providing more workers and employees with opportunities to buy shares, companies can help workers and communities raise their standard of living and simultaneously feel more invested—literally—in the success of the enterprise.”

There’s a symbiotic relationship that occurs in employee-owned companies. First, the employees are empowered through ownership. They are given more opportunities to thrive financially, which benefits their families and communities. In this way, the wealth gap loses some of its sting, as the positive impacts of employee ownership ripple out through future generations.

As with business changes like embracing remote-work arrangements or offering mental health benefits, there are definitely some up-front costs associated with forming an employee-owned company—but rest assured that they can be more than repaid over time. For example, employee-owned companies often outperform their competitors. And they really show their mettle during times of duress, such as the lockdown of 2020. When employees have skin in the game, it stands to reason that they’re more motivated to dig in and find solutions.

So rather than a 1-sided deal, employee ownership becomes another entry in the Michael Scott Win-Win-Win Hall of Fame. In reality, any business owner who views employee ownership as an outright threat probably hasn’t done any research.

What Is an Employee-Owned Company?

While nearly all business owners compensate their employees with money, an employee-owned company also provides them with stock. But it’s not just any stock—it’s stock in the company where they work. This means that an Employee Stock Ownership Plan (ESOP) makes employees shareholders, giving them a powerful incentive to perform.

According to the National Center for Employee Ownership, the number of employee-owned companies is on the rise. Check out these key statistics:

• There are 6,501 ESOPs in the US
• Their assets exceed $1.4 trillion
• ESOPs have 14 million participants
• 22% of ESOPs are in the manufacturing industry
• 19% of ESOPs are in the science and tech industry
• Texas has the most ESOPs, followed by California and Florida
• Wyoming has the fewest ESOPs

The nuts and bolts of running your ESOP can be customized to your business. For example, you might want to determine the compensation of stock by how long each employee has been with your company. Another option would be to base the stock compensation on your employees’ hourly pay or salary.

Likewise, you can choose whether to have a gradual vesting period (such as a 20% increase every year for 5 years) or a 3-year waiting period before a total vestment. Employees can then hold onto their stocks until they choose to sell. Both of these approaches have unique benefits, so it’s important to talk to your business mentor and other experts to gain insights on how to proceed.

The Broader Benefits of Employee-Owned Companies

Because of the devastation of the COVID-19 pandemic, the United States could definitely use the collaborative boosts provided by ESOPs. It’s a chance for employers to share the rewards of success in a new way, which makes it possible for everyone to prosper.

“Within the next decade, we expect worker- and employee-owned companies to grow in popularity thanks to 3 mutually reinforcing trends,” explain Walsh, Peck, and Zugasti. “First, renewed interest in ensuring the economic viability of local communities suggests that baby boomer owners about to retire are increasingly likely to want to sell to workers. Second, evidence is mounting that worker- and employee-owned enterprises outperform their competitors, especially during economic downturns; a recent Rutgers study found that converting to worker and employee ownership boosts profits by as much as 14%. Third, as a result of strong performances by worker- and employee-owned companies, it is becoming easier for workers to overcome arguably the biggest hurdle to worker buyouts: financing.”

As ESOPs become more commonplace, you can anticipate a corresponding rise in interest from employees at companies that aren’t following that model. If your business is considering it as an option, this is a great time to conduct more research and see if it’s a wise move.

Perhaps you have compelling reasons not to transition to an ESOP—that’s completely understandable. Just be prepared to communicate those reasons to your employees, helping them to see your perspective and including them in your conversations regarding the topic.

They’re strategic partners and invaluable assets with unbeatable wisdom and experience beyond their years. And they love helping small businesses grow and succeed. 

Many entrepreneurs lack the capital they need to grow their businesses. They know what it takes, but they don’t have the funds to bring their vision to life. And that’s where these people come in—as investors. 

For small business owners, your business is like your baby—you were with it from the beginning. You nursed it from infancy, took care of it, and watched it grow into what it is today. 

You built it into a healthy and thriving business. It’s so strong that it’s given you your livelihood and allowed you to provide for your family. But now you need a little help. Because you know what it can be, and you’ve taken it as far as you can on your own. 

Taking on an investor can be scary, but sometimes it’s necessary. In this article, we’ll talk about how you can find the right investor for your small business. But first, we’ll go into the benefits of working with them. 

How Investors Help Small Businesses

The value of an investor goes far beyond the money they provide. When you work with one who has experience in your industry, they can offer their acquired knowledge and expertise—and teach you things that might have taken you years to learn on your own. Some even seek out new entrepreneurs so they can pass on their knowledge and assist in the beginning stages of growth.  

Seasoned investors can guide you to keep you from making mistakes. You can also use them to vet ideas as you consider new business avenues worth pursuing. 

Another thing about investors is that they can offer you invaluable connections. Some may be able to introduce you to the right people—and get you into the inner circles of people who were out of reach before. 

How to Find Investors for Your Small Business

The funding to start, manage, and grow your business does not need to come from you alone. You can acquire it from a variety of sources—investors included. Below, we’ve got some helpful advice on how to find an investor for your business. 

Start With Your Family and Friends

Nobody knows you better than your family and friends. When they see potential in you and believe in your idea, they may be the first ones to invest. Especially if you already have a proven track record or you’re known for doing something exceptionally well. 

Here’s an example: let’s say you’re the best baker in town. You’ve competed against your peers, won numerous awards, and you’re always the first one people think of whenever they have a taste for a delicious sweet treat. 

When you get the idea to open a pie shop, you may not have to look beyond your inner circle—full of people who know you, love your products, and know firsthand how amazing they are. 

An investment from family and friends is often one of the easiest to get. You don’t have to jump through hoops or cut through red tape like with other options. You could also raise money from multiple friends and family members. Every little bit you raise will get you one step closer to your goal. 

Seek an Introduction From One of Your Connections

If you don’t have any friends or family with the ability to invest, take a step back and consider their connections. Could they possibly secure you a powerful introduction?

An introduction to a potential investor will go much further than if you were to contact the person on your own—either through cold emailing or some other means. And you never know who your friends are connected with. Maybe you have a cousin who works for a large investment company or a friend who can connect you with a startup assistance group. 

Or better yet, maybe you know another successful entrepreneur who can vouch for you. This will go a long way for an investor who relies heavily on the word of other business owners—especially those they respect and have worked with. 

Reach Out to Schools and Other Businesses in Your Industry

Consider how many people you know in your line of work. No doubt you’ve probably met others at industry events or bumped into business owners in your hometown. You might even belong to online groups full of people in your industry. 

Try connecting with some of them to see if you can get a referral or a recommendation. You could also reach out to schools and learning institutions in your field. The professors and heads of the many different departments may be valuable resources for getting you in touch with willing investors. 

Try Crowdfunding Platforms 

Crowdfunding platforms provide a means to help individuals and businesses by allowing them to raise the funds they need online. Here are all the different types of crowdfunding platforms, along with examples of each one. 

Reward-Based Platforms

Reward-based crowdfunding asks people to contribute a certain amount of money in exchange for some reward. Usually the reward relates to the business in some way—people get to try the product in exchange for investing. Kickstarter and Indiegogo are examples of this. 

Here’s how it works: Let’s say you’ve got a doughnut shop and you want to raise $500. Each person who invests $15 gets a dozen donuts. Those who pledge $25 get 2 dozen donuts, and people who put up $50 get 3 dozen donuts plus mocha iced lattes. 

Donation-Based Platforms

With donation crowdfunding, the money contributed is not expected back. People give willingly, usually with the desire to help fund a particular project. The purpose can be for anything from raising funds to help a struggling family or providing emergency assistance to an entire community. 

GoFundMe is a great example of donation-based crowdfunding. 

Peer-to-Peer Lending 

Peer-to-peer lenders match businesses needing money with investors. Applicants start the process by filling out an online form, and lenders give the potential investors a credit score for the business. Then the decision is made on whether to lend the money. 

This option appeals to investors because it allows them to receive their money back on a monthly basis—with interest included. Borrowers typically pay less than they would if acquiring a bank loan, and the investor earns a higher return than through a typical bank investment product. 

The risk to the investor is serious in the government doesn’t protect it. Examples of peer-to-peer lending include Lending Club and Prosper. 

Equity-Based Platforms

With equity crowdfunding, investors take partial ownership of the company. The original investment is not paid back, but it’s returned to the investor in the form of shares in the company. They also receive a share of the profits. 

Investment amounts typically start in the thousands of dollars. This makes equity-based crowdfunding a much riskier option for the investor because a return isn’t guaranteed. 

OurCrowd is an example of an equity crowdfunding platform. 

Be Strategic When Networking

Start by thinking of ways to connect with the investors you want to attract. Consider where they hang out—both in person and online. What groups do they belong to? What extracurricular activities do they enjoy? Then think of how you can become a part of those groups.  

Networking with the right people opens doors that might have been closed before. Your alumni network might also be a good starting point for finding investors. You can then look into trade organizations or your local chamber of commerce. Another resource is your local Small Business Development Center (SBDC). 

Please note, networking is valuable, but only when you do it right. Start networking by attempting to be of service. Allow people to trust and get to know you. Don’t go in with a blatant sales pitch that will turn people off. 

Apply for a Small Business Administration Loan

The Small Business Administration (SBA) is a government organization focused solely on helping small businesses. The agency itself does not lend out money, but they have a lender match tool on their website. This helps businesses find lenders who are approved by their organization. 

The SBA will also guarantee loans and offer lower interest rates, and they’re helpful in other ways too. Their website is full of helpful tools for entrepreneurs. It’s full of resources to assist everyone—from those in the business planning stages to entrepreneurs needing help to grow their businesses. 

Should You Get Investors for Your Business?

There is no right or wrong way to get an investor for your business. Some methods may take more effort than others. You might even consider options we didn’t list—like working with angel investors. 

Don’t let a lack of capital keep you from your goals. Consider first how much you need and then decide on a course of action. You may go with one method listed above or combine a few different strategies. It’s about what it takes to fulfill your business goals. 

No one knows your business better than you do—and your journey is like no one else’s. So go through every option you can to find the best solution for you.

As you develop your business accounting processes, you may notice different types of profits in your reports. Each of these metrics serves a different purpose in providing insight into the financial health of your business. 

Economic profit and accounting profit are 2 important business measurements for you to understand. Learn the difference between economic and accounting profit below. 

How Is Accounting Profit Calculated?

For example, you will start with your total revenue and then subtract wages, raw materials, marketing costs, and other overhead. These are the explicit costs of running a business.

Typically, you can find the accounting profit (net income) on the company’s income statement or profit and loss (P&L) documents. 

What Is Meant by Economic Profit?

Economic Profit = Total Revenue – Total Explicit Costs – Total Implicit Costs

A common example of implicit costs that you won’t see on the income statement is when a small business owner works overtime or works for a period without drawing a set salary. If you’re an owner doing this, you are not directly costing your business any money, but you are incurring implicit costs because the opportunity cost of your labor is equal to what you could be earning at a regular, salaried position.

Implicit costs are often hard to evaluate and measure, but they are extremely real aspects of running a business. Choosing to use your warehouse to store inventory vs. converting it to a storefront is a decision that has an opportunity cost. Deciding whether to hire employees or outsource work creates implicit costs, too. There are many examples of decisions small business owners have to make that carry implicit costs.

This year, businesses are likely considering economic profit amid the COVID-19 pandemic. What if the store had remained closed longer or opened up faster? What if the company invested in curbside delivery? 

Economic profit relies on implicit costs, using the company’s resources in different ways to maximize potential growth. 

Can Economic Profit Ever Exceed Accounting Profit?

The economic profit comes from subtracting the opportunity cost from the accounting profit. For example, a restaurant earns $60,000 running a food truck over a year but had the potential opportunity cost of $50,000 from launching a catering arm instead. The economic profit is $10,000 to the company because it profited from the food truck opportunity.  

Economic profit can be a negative number. If the economic profit is positive, then it is in the best interest of the business to keep making money in the field. If the economic profit is negative, then the business should exit the market and look for other income sources. 

For example, a freelance web designer earned $75,000 in a year. However, if most people in their field earn $100,000 annually working for an agency, there is a negative economic profit and the freelancer should consider seeking full-time employment. 

There is also no such thing as a negative opportunity cost. There are always profits for potential opportunities. The opportunity costs track the options that businesses did not choose (or couldn’t choose), not penalties that held them back. 

Use Both Types of Profit Calculations

You can also use this theoretical process to forecast potential revenue if you change your business plan or make a future investment. Economic profit and accounting profit are both helpful metrics to use when evaluating your financial health and how to best take your business forward.

Corporations come in all shapes and sizes: there are massive companies like Apple and Nike but also single-person corporations or those with only a handful of employees.

A corporation, for tax purposes, doesn’t have limits on its size. If you are a small business owner, you may want to consider establishing yourself as a corporation. In the eyes of the IRS, you can either become a C corporation or an S corporation. Understanding the difference between these 2 concepts can help you file for the correct status—and file your taxes more easily. 

Learn about the differences between C-corp and S-corp business designations to decide which type of business is best for you.

S-Corps Use Pass-Through Taxation

One of the biggest differences between S corporations and C corporations is that S-corps utilize pass-through taxation. Essentially, the business itself doesn’t actually pay taxes, which means the tax burden passes through to its owners. 

Pass-through taxation is often used for small business owners, partners, and sole proprietors. For example, a freelance web designer might establish an LLC to protect their personal finances. Even though their clients pay the LLC, all profits go to the individual who owns it. The LLC doesn’t have any profits to report, which means it can’t pay taxes. Even if the company reported profits, the business owner would have to pay taxes twice (once as a business entity and once as an individual). 

With a pass-through entity like an S-corp, all of the company profits are credited to the shareholders. This is the taxable income, not the revenue from the business. The shareholders and owners will report the earnings on their personal income tax forms and pay the IRS in this manner. 

With a C-corp, the corporation is taxed, which means the owners pay taxes twice. First, the company pays corporate income tax, and then the shareholders pay personal income tax. There is also a greater risk of double taxation when corporate profits are paid to shareholders as dividends. The IRS has guides for both S-corps and C-corps to fill out the proper tax forms and report their income rates each year.  

While setting up pass-through taxation might seem like a strategic move for your business, there are benefits to creating a C-corp instead of an S-corp. Whether you will reap these benefits depends on the future growth plans and structure of your organization.

S-Corps Have Limited Shareholders

Startup founders who want to bring in several stakeholders and eventually become a publicly-traded company often prefer C-corps. You aren’t limited by the number or types of shareholders you can have with a C-corp. 

With an S-corp, however, the number of shareholders you can have is limited. No S-corp can have more than 100 shareholders, and they must all be US citizens. Additionally, you can only have 1 class of stock for your shareholders. While different shareholders can hold different percentages of the company, they each have the same type of stock.

For example, Google has 3 different classes of stock. Each class is meant to provide different benefits to shareholders and powers to the founders:

• Class A: This is the standard option, where 1 share means 1 vote. If you invest in Google today, then you will most likely be a Class A shareholder. 
• Class B: This stock is primarily held by the founders who want to maintain control of the company even when people keep buying it. With this option, each share grants the holder 10 votes.
• Class C: This stock is mostly held by employees. This class has no voting rights.

This structure gives the most voting rights to the founders. Similar structures at other companies deny voting rights to some classes of shareholders. If you plan for your business to go public or if you want to open your company to new shareholders, you may need to create different share classes. 

C-corps are better able to raise venture capital because of their share structures. It may be harder to lure investors to your business if you choose to open an S-corp—important if you don’t plan to bring your business public but want to grow your working capital through private investment in the future. 

However, this is a non-issue if you only have a few key owners. Many S-corps are run by sole proprietors who are their only owners. They own 100% of the shares and take home 100% of the dividends. If you only plan to bring on a few investors, you might not need to consider the complexity of a C-corp. 

In the case of both S-corps and C-corps, you will need to report all of your shareholders in your tax documents. The S-corp application allows owners to add additional pages if there are more than 10 shareholders when the business is established. This proves that all of the shareholders approve of the formation of an S-corp and the tax burdens that come with it. 

C-Corp Is the Default Formation Option

When you decide to form a corporation, C corporation is the default option. It is possible to register with your state or file articles of incorporation today as a C corporation. However, if you want to become an S corporation, you will need to take steps to apply for this status through the IRS. 

Companies that want to reach S-corp status need to complete IRS Form 2553. With this form, you’ll need to explain when your fiscal year starts and ends (if different from December 31), and this date will determine your deadline to file.

Companies that start their fiscal year on January 1 need to file Form 2553 by March 15 to qualify for the current tax year. If your fiscal year starts earlier or later, then the IRS sets different time deadlines. If you fail to complete Form 2553 by the deadline, then you might not qualify as an S-corp for another year. 

The IRS will let you know if your business qualifies to operate as an S-corp. The application process typically takes a few weeks—longer if Form 2553 is filled out incorrectly or if the IRS is experiencing backlogs in its mail. 

Regardless of whether your company gains approval to become an S-corp, you’ll still need to follow the same steps to form your business, submit an annual report to your state, and pay incorporation fees. You’ll also need to appoint a registered agent to act on your company’s behalf and create bylaws and guidelines for shareholders. Each year, if the number of shareholders or the percent each owner has under their name changes, you’ll need to report the adjusted ownership to the IRS.

It Is Harder to Transfer Stock With an S-Corp

With standard corporations and publicly-traded firms, the market determines the value of each share. This is why a shareholder can buy the stock at different prices—they might buy at 1 level and then increase their shares when the price drops in the future. However, with an S-corp, there is no public listing to determine a share price. There also aren’t easy ways for shareholders to sell their stock and buy from other companies. 

With an S-corp, an existing shareholder will need to work with the owner and other shareholders to sell their holdings. They’ll also need to agree on a market price for the buyout, typically based on the initial investment and changes to the company since then.

For example, if an initial shareholder invested $10,000 and the company has grown significantly in the past few years, they might sell their shares for $20,000 because of the increase in the company’s perceived value. If the owner wants to buy out a shareholder, they will make a compelling offer for the shares in order to entice them to sell.  

With IRS Form 2553, the owner needs to list each shareholder and their percent ownership. If a company has an ineligible shareholder—like someone outside of the United States or over the 100 person limit—then the S-corp status may be disqualified. While you can bring on new shareholders and buy out other shareholders as an S-corp operator, think about the challenges of transferring stock and how it could affect your business. 

Your Corporation Status Can Help or Hurt Your Taxes

While the main difference between S-corps and C-corps is how they are taxed, it’s also important to look at the rate at which corporations are taxed. For example, according to the 2017 Tax Cuts and Jobs Act, individual taxable income can range as high as 37%. However, C-corps are taxed at a flat 21%. This means that the taxes that business owners pay as a C-corp might be lower—even if they have to pay both corporate and personal taxes. 

However, according to the same act, owners of pass-through entities (like S-corps) may be able to deduct up to 20% of their business income from their tax returns. This provides a significant tax deduction if you are paying a high rate of personal income tax. 

While these 2 tax rate benefits are significant, it’s hard to determine which option is better. If you want to look at different scenarios based on your current financial situation, a tax specialist or accountant should be able to help you work out the numbers and find ways to help you save money. 

Consider Whether You Are Distributing or Reinvesting

While your shareholders can help to determine whether an S-corp or C-corp is better for your business, you also need to consider what you plan to do with your profits. 

If the majority of your profits will get distributed to your shareholders, you may be better off operating as an S-corp. This way, you won’t pay taxes on your profits as corporate income and then pay taxes on personal dividends. 

However, if you plan to reinvest the majority of your profits within the organization, your business may be better off as a C-corp. For example, as an owner or manager, you would pay taxes on the salary you get from the company and submit a standard W-2 form with your personal income taxes. You can then spend your company profits on additional investments—like paying down the mortgage on your office space or investing in additional fleet vehicles to grow your team. In this case, the profits become line items on your balance sheets as tangible assets. 

If you have strong plans for growth in the future, then a C-corp may be a better option. You will turn most of your liquid capital into assets instead of paying out cash to shareholders.    

Both S-Corps and C-Corps Provide Personal Protection

One of the main benefits of both S-corps and C-corps: they protect the income and assets of the individual owners and investors. This is why you see sole proprietors and partnerships become corporations—particularly limited liability corporations (LLCs). 

If you operate as an individual owner without protection, your clients or employees can pursue your personal assets if they feel you have wronged them. For example, if you fail to complete a project for a client and they win a lawsuit against you, then the creditors claiming the damages may be able to go after your personal assets, like your house or savings accounts. If you can’t pay the damages in cash, these creditors might be able to claim your car as an asset. 

However, with a corporation, the creditors can only claim funds from the company, not the individual. If you have a company car under the business’s name, then the creditors can use that. However, they can’t touch any of your private assets. In the case of sole proprietors who form S-corps, most of the income passes through to the individual. This makes the business almost worthless except for any reported assets, equipment, or funds that haven’t been paid out. 

Even if you aren’t sure whether you want to form an S-corp or C-corp, take steps to become a corporation to protect yourself as your business grows.    

Management Still Operates the Business

Another similarity between S-corps and C-corps is that management still operates the business, even if there are multiple shareholders. For example, a startup founder might own 60% of the business and have 4 shareholders who each own 10%. If the founder is managing the day-to-day operations of the company, they’ll continue to run the business regardless of who the shareholders are. 

Corporations aren’t run by shareholders. Just because you buy stock in Apple doesn’t mean you work there. Most corporations still have a C-suite (CEO, CFO, etc.) and senior leadership levels that are responsible for managing the business. 

However, the owner and executive board of directors need to act in the best interest of the shareholders. This is called the “fiduciary duty of loyalty,” and it states that any executives must act in the best interest of the business or shareholders. This prevents owners from making decisions that they would directly profit from but could hurt shareholders and negatively impact employees.

This fiduciary duty is often why employees have different shareholder classes where they cannot vote on issues related to the company. They might know more about the operations than other voters—potentially leading to insider trading—or they could impact the company’s performance in order to profit personally.  

As you file to become a corporation, don’t get confused by what it means to be a shareholder or investor. If any confusion arises, create written guidelines in your bylaws about the rights of shareholders and the ethical responsibilities of owners. Ask a lawyer to review them and have your shareholders sign them before becoming cleared to buy into your firm. 

Evaluate Your Current and Future Business Goals

If you want to grow your shareholders and improve your working capital by working with investors, you may want to establish your business as a C-corp. If you plan to grow your business and keep your capital tied up in assets, you may benefit from working as a C-corp.

However, if you want to continue operating as a pass-through entity and expect to have a limited number of investors, an S-corp might be a better option. Review your choices and your plans for your future before you begin the S-corp application process. 

If you ever need to change your status with the IRS, you will need to fill out extra paperwork and navigate a waiting period. While it’s possible to change your status, you will have fewer headaches if you move forward with the right business structure on your first application. 

If you operate a small business or are self-employed, you may want to establish your business as a corporation. In the United States, you have the option of becoming an S corporation (S-corp) which allows for pass-through taxation and shareholder dividends.

If you’re considering turning your business into an S-corp, you’ll need to become familiar with Form 2553. Use this guide to learn more about this form and how to submit it. 

What Is Form 2553?

Form 2553 is a 5-page document that asks filers about their organization, fiscal year, and shareholders. However, if you have several shareholders, you may need additional pages. 

Once you’ve completed Form 2553 and any supplemental documents to form a corporation, the IRS will confirm whether your organization is approved to operate as an S-corp. If your organization doesn’t qualify, then you may need to recheck your paperwork or apply as another operating entity. 

How Do I Fill Out Form 2553?

Page 1: Mailing Address

Page 2: Basic Information

• Your name and Employer Identification Number (EIN)
• Your business street address (city, state, zip code)
• The date your business was incorporated and the state where it was incorporated
• The planned start date for your S-corp election 
• Your company’s tax year
• The name and title of your legal representative, along with their telephone number (By providing this, you authorize the IRS to call them for more information.) 

This page of Form 2553 also asks whether you have more than 100 shareholders (which can limit your eligibility) and if you are filing late. Form 2553 must be filed before the 16th day of the third month of your corporation’s tax year.

If your tax year starts on January 1, you have until March 15 to complete the form. However, you can also file ahead for the upcoming tax year if you have already missed this deadline.  

If you are filing for your S-corp past the approved deadline, you’ll need to write an explanation as to why—and the steps you took to correct your actions. If you file Form 2553 too late, the IRS may deny the application, and you’ll need to reapply next year. 

Page 3: Shareholder Consent

For example, if 2 people form a partnership and decide to become an S-corp, 1 person would file Form 2553. However, they would both be listed on this page. Whoever owns more of the company—typically in the form of money invested—would have a higher percentage of shares. 

Deciding who owns your shares is important before you file to become an S-corp. This will determine how your dividends are paid each year. 

Form 2553 currently has spaces for 7 shareholders. However, if you have more, you’ll need to add all of them to ensure that your full company is represented. 

Page 4: Fiscal Tax Year

The IRS sets a standard tax year of January–December (with certain exceptions for various departments). In order to avoid penalties for missing different filing dates or creating confusion, you need to tell the IRS if your tax year differs from this one. 

If you already operate on a tax year that ends on December 31 and plan to continue with it, this page is pretty straightforward. It may look complicated, but it won’t be a problem if you have a standard tax year. 

Page 5: Trust and Late Classification

The final part is only relevant if you are seeking late corporate classification election representation. You will need to complete additional forms to qualify for these special exceptions. 

Take your time filling out Form 2553. By making sure each form is correct, you can avoid refiling with corrections and prevent delays on your S-corp approval.  

Can You File Form 2553 Online?

Do not mail Form 2553 to your closest location. IRS locations are not based geographically: just because you live closer to Utah doesn’t mean your form goes to the Ogden location. Failing to send your form to the correct address could cause delays in approval—or it could cause the IRS to ignore your application completely.  

How Do I Know If My Form 2553 Was Approved?

If your S-corp application is approved, the IRS will send you a letter confirming this status. Save this copy for your records. The IRS should also send you a letter if your status has been denied.  

How Long Does It Take to Process Form 2553?

However, 2020 and 2021 have not been standard years. Due to the COVID-19 pandemic and partial government shutdowns, the IRS experienced a massive backlog of unopened mail last June.

IRS Deputy Commissioner Sunita Lough estimated that more than 11 million unopened pieces of IRS mail needed to be reviewed and processed. Even before the pandemic, the IRS estimated that it could take up to 16 weeks to process written tax returns and other forms.

The IRS continues to experience a backlog of mail and has extended the 2021 tax season. If you submitted Form 2553 at the start of the year (before the March 15 deadline for businesses on a calendar year) but still haven’t heard back, the issue likely isn’t on your end. You can call the IRS to check on your S-corp status and see if they’ve processed your application yet.   

Learn More About Becoming an S-Corp

After your 5th (or 6th, or 7th) Zoom meeting of the day, you may feel like you’re just talking to yourself, especially when there’s a mix of people on calls with cameras on and off.

While video conferencing tools like Zoom make it much easier to collaborate with coworkers remotely, it can also lead to “Zoom fatigue,” which refers to the mental and physical exhaustion you feel after taking a video call. That’s because your brain has to work harder to process information with video, from facial expressions, time lags, and the general feeling of being “on” for hours at a time without a rest.

“It’s similar to what we tend to think of as exhaustion or burnout,” Krystal Jagoo, MSW, RSW, told Healthline. “Increased cognitive demands of video conferencing communication [means] folx need to create the illusion of eye contact while also mentally processing their verbal communication.”

With so much Zoom fatigue, would it be better to keep cameras off? 

Why you should keep your cameras off.

For a growing number of people, the answer is yes.

“In person, we are able to use our peripheral vision to glance out the window or look at others in the room. On a video call, because we are all sitting in different homes, if we turn to look out the window, we worry it might seem like we’re not paying attention,” writes Liz Fosselien for Harvard Business Review. “Not to mention, most of us are also staring at a small window of ourselves, making us hyper-aware of every wrinkle, expression, and how it might be interpreted. Without the visual breaks we need to refocus, our brains grow fatigued.”

Turning cameras off is a simple but effective way to reduce Zoom fatigue, but it also takes the pressure off on appearance—both in terms of looking engaged but also keeping a squeaky-clean background, worrying over dogs or housemates strolling through the frame, and personal appearance.

An ongoing meme speaks to this anxiety. What started as a joke account rating celebrity Zoom backgrounds now has over 400,000 followers on Twitter, adding to the idea that everything has to be “perfect” and eliminating boundaries between work and home.

New Room. Love the California bear pillow. Chairs. Depth. Books. It werks. 10/10 @ProfMMurray pic.twitter.com/VcA22gbsw1

— Room Rater (@ratemyskyperoom) June 6, 2021

But that’s not the only reason. Turning off your camera can actually help the environment, too. Keeping cameras off can reduce the carbon footprint of virtual meetings by up to 96%. That’s because streaming high-definition content requires significant data processing, which uses electricity and other forms of energy.

One hour of videoconferencing emits 150–1000 grams of carbon dioxide and requires up to 12 liters of water. While this is still better than carbon emissions from gasoline, which emits about 8,887 grams in the same timeframe, it’s not nothing.

“The internet’s carbon footprint had already been increasing before COVID-19 lockdowns, accounting for about 3.7% of global greenhouse gas emissions. But the water and land footprints of internet infrastructure have largely been overlooked in studies of how internet use impacts the environment,” Yale senior fellow Kaveh Madani shared in a press release. “Banking systems tell you the positive environmental impact of going paperless, but no one tells you the benefit of turning off your camera or reducing your streaming quality. So without your consent, these platforms are increasing your environmental footprint.”

Why you should keep your cameras on.

Not everyone is in camp camera-off for exactly the same reasons why we all jumped on Zoom in the first place: keeping cameras on makes you feel more connected to the person you’re talking with. 

“Turn the focus back to what you are saying and how you are saying it. Your message and how you are delivering it will take the pressure off your appearance and allow you to be present on camera,” writes public speaking coach Vanessa Wasche for Fast Company. “Most people are more comfortable without the camera, but you can use this to your advantage.”

If you’re giving a presentation, working through a tough problem, or simply want to feel more present in a meeting, it’s best to turn your camera on if you want to get your message across more clearly. Cameras on is the best approximation we have for in-person meetings, especially the nonverbal cues like hand gestures, smiles, and nodding. 

For others, keeping cameras off feels rude or inappropriate.

“Most times, when people turn off their video options in a Zoom meeting, it is because they are doing something else while the meeting is going on. Or because something else is wrong; either they are not appropriately dressed, or they are in the wrong environment, or are not adequately prepared for the meeting,” writes communications expert Jaime Abbott. “[It feels like you’re not prioritizing] the other participants in the meeting.”

So, what to do?

Your colleagues may be completely burned out on video conferencing, and that’s OK. Whether you’re planning a hybrid approach or a full return-to-work plan, it’s important to get a pulse check on your teammates or direct reports and figure out what’s best for them.

If you’re not sure whether to keep cameras on or off, try:

• Determine ahead of time whether the meeting needs to be a Zoom (for example, for a strategic or brainstorming meeting) or if a phone call will suffice (for status updates, all-hands, or 1:1s).
• Schedule breaks from video calls for yourself or implementing a policy with calls ending on the :45 or :50 as the norm, rather than the full hour.
• Encourage standard backgrounds or blurring features for employees to prevent background-gawking or pressure. 
• Keep virtual meetings smaller. The more people on the call, the more pressure. Think mindfully about who will best contribute to the discussion and if everyone needs to be there.

Whether you turn your camera on or off, the most important thing is to stay mindful of yourself and others. While it may seem like you’ve been Zooming for years, it’s still relatively new for most people—and like any new technology, our norms and etiquette will evolve.

Many small businesses, including every American business with employees, need to be uniquely identified by the Internal Revenue Service according to the tax code. To get this number, you first have to fill out Form SS-4 for the IRS. Not only is this form important for your taxes, but potential lenders and investors often request it.

What Is Form SS-4 Used for?

Form SS-4 is used to obtain an Employer Identification Number (or EIN). Form SS-4 is 1 page and requires pretty simple information to put together.

Form W-9, which requests the taxpayer identification number of a taxpayer, is different from Form SS-4. While W-9 can seek certification of an EIN, Form SS-4 is used to actually apply for an EIN.  

What Is an Employer Identification Number?

An EIN is a unique number that identifies your business with the IRS. It is similar to an individual’s Social Security number, except that you aren’t issued a card like your Social Security card. The IRS created the EIN system in 1974.

Does My Small Business Need an EIN?

The IRS has a simple checklist for if your small business will need an EIN. Most small businesses that aren’t sole proprietorships will likely need an EIN.

If any of the following questions apply to your small business, you will need an EIN:

• Do you have employees?
• Is your business structured as a corporation or partnership?
• Do you file tax returns for Employment, Excise, or Alcohol, Tobacco, and Firearms?
• Do you withhold taxes on non-wage income paid to a non-resident alien?
• Do you have a Keogh plan (an uncommon retirement plan)?
• Is your business involved in any of the following types of organizations: trusts, IRAs, Exempt Organization Business Income Tax Returns, Estates, Real estate mortgage investment conduits, nonprofit organizations, farmers’ cooperatives, or plan administrators?

If you answered “yes” to any of these questions, you should fill out SS-4 and submit it to the IRS.

Using Form SS-4 To Obtain an EIN

Applying for an EIN with the IRS is always free. Beware of any services or websites that claim you must pay to receive an EIN. You can apply for an EIN online, which is similar to filling out Form SS-4 but without the physical paper.

To apply for an EIN through fax or mail, though, you will have to fill out Form SS-4.

You can do this before opening the doors to your business if you know your company will need one.

“If you are thinking about setting up a business, IRS Form SS-4 is a critical step to take because it’s your business’ unique identifier to the IRS. This number is linked to bank accounts and many other aspects of your business,” explains tax preparer H&R Block.

Whether applying online or with Form SS-4, the application must list the name and taxpayer identification number (that is, the Social Security number, EIN, or Individual Taxpayer Identification Number) of the true principal officer, general partner, grantor, owner, or trustor. The IRS calls this person the “responsible party,” and the person “controls, manages, or directs the applicant entity and the disposition of its funds and assets,” the IRS says.

The IRS requires you to keep the information up-to-date on your Form SS-4 in regards to your company and the responsible party. Changes can be submitted using IRS Form 8822-B.

“Keep the Form SS-4 information current,” the IRS continues. “Use Form 8822-B to report changes to your responsible party, address, or location. Changes in responsible parties must be reported to the IRS within 60 days.”

Once accepted by the IRS, you will receive a notice from the agency.

How to Fill Out Form SS-4

Filling out Form SS-4 is straightforward, and the information required for the 1-page form should be easily available. While the specifics of how you fill out the form will depend on your business, structure, and industry, you generally are providing identifying information for your company and the responsible party filling out the form.

Expect to provide information like:

• The business’s name and address
• The responsible party’s name and taxpayer identification number
• Structure of business
• The date your business was created
• Your reason for applying to the IRS for an EIN
• The number of employees that work at your business
• Your business’s main activities
• The main types of products and/or services your business offers

How Lenders Use Your Form SS-4

Beyond registering with the IRS, you will likely also need to have your Form SS-4 handy when applying for business loans.

Form SS-4 shows that your business is officially verified with the IRS and, therefore, the United States government. Your SS-4 notice and EIN are both important to have in hand when you go about applying for commercial loans. 

Lenders look at your EIN and Form SS-4 much in the same way your Social Security card is used to verify your identity in the US. It also shows that your business is based in the U.S. 

Remember, unlike your Social Security number, no card is issued when you receive an EIN. Your Form SS-4 notice serves the same purpose as a Social Security card, which is why lenders will want to see a copy of it. 

If you need a copy of your Form SS-4, contact the IRS Business and Specialty Tax Line.