Biz Miss

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Getting an EIN: the Easiest Part of Starting a Business January 12, 2008

If you’re a sole proprietorship, you need an EIN.  Well, legally you don’t need one, but in a world full of identity thieves, isn’t it nice to be able to keep you social security number to yourself?  As a new business owner, an enormous number of people are asking for it these days. I find it really disconcerting to have to write it on every bank, credit, shipping and merchant service application I fill out.

An EIN, or Employer Identification Number, otherwise known as a Federal Tax ID, does not actually require you to employ anyone to get it. In fact, it’s so easy to get, you’d be a fool not to do it right now.  All you have to do is visit the EIN page on the IRS’s website.  You can apply in five minutes online (though only during certain hours–I have no idea why), and be instantly approved.  You just print your identification page at the end of the process and you can start using it immediately for almost anything (you have to wait two weeks before using it to file your taxes).  The best part?  It doesn’t cost a dime.

One small note: an EIN is not what will allow you buy things wholesale, at least not in the state of California.  For that you need a seller’s permit, which is a whole other kettle of fish, and is the same document that you need to collect sales tax.  This requires more time and money than getting an EIN.


What are Merchant Services? January 4, 2008

Filed under: Banking,Sales,Starting Up — bizmiss @ 1:35 am

This, it turns out, is a very complicated question. Merchant services, generally speaking, are ways for your business to process credit cards. But there are many different kinds of merchant services, and each business only needs one to three out of the myriad available. Figuring out which merchant services I need, making sure they are all compatible with each other and finding them affordabley is proving to be a more challenging task than I had anticipated. I still haven’t quite settled on the providers for my credit card processing needs but at least now I know what I’m looking for. It took me days to figure this out.

I started with my bank, since most banks offer merchant accounts and you can often get a competitive rate if you are already a customer. I have a free business checking account with Washington Mutual so I went into my local branch before the holidays and they put me on the phone with Ethan, their TransFirst merchant services guy. That was when the questions began that I couldn’t answer:

Ethan: “Are you looking for POS, online or MOTO processing?”
Me: “What’s the difference? Er…sign me up for one of each?”
Ethan: “Well, how much do you generate in monthly credit card sales, on average?”
Me: “I don’t. I don’t have a credit card processor yet.”
Ethan: “Okay, then, what would you estimate?”
Me: “I don’t know. I don’t know how many customers will choose to use credit cards.”
Ethan: “Well how about the types of payments you will be accepting. Will you need a virtual terminal, a gateway, a wireless device?”

Sensing I might be in a little over my head (though I clearly covered well), I mumbled something about “running my numbers” and told him I’d get back to him. Then began several days of trying to figure out what the hell he was talking about.

First I visited (Lord, how I love this web site) and read the 8 page thread about processing credit cards. Since crafty Biz Misses always comparison shop, I thought this would be a great place to begin to find details and good deals. Many of the posters recommended Propay, Thompson (a reseller for Chase Paymentech) and Amex PuchaseExpress (for Amex processing, specifically). Then I looked up Quickbooks, since I have their accounting software. If their rates were reasonable it would be a bonus to have something that would seamlessly integrate with my bookkeeping. Some more searching brought up TermNet, Paynet, Heartland, MSI (Merchant Services, Inc.) and Chase Paymentech themselves. Some companies post their rates and charges up front, but visiting these sites was most helpful for coming up with a fairly comprehensive list of questions to ask their sales representatives. I wrote all of the companies’ names and my questions into a grid for easy comparison and started calling.

I’ll save what happened next for the next post, since, as I said, I haven’t yet settled on my merchant provider(s), but here’s what I learned after three straight hours of excruciating phone calls:

  1. You need a completely different set of services depending on whether you swipe credit cards in person (at your brick-and-mortar store, for example), take phone or mail orders, or want people to be able to buy things on your web site using their credit card.
  2. A business like mine, which needs to be able to take phone, mail and Internet orders, needs both a merchant account and a payment gateway, in addition to SSL encryption on my web site.
  3. Some companies can provide one, two or all three of those services.
  4. Every company charges a different mix of one-time, monthly, and per-transaction fees that make it nearly impossible to compare prices accurately.
  5. If you can speak to an authorized sales agent, rather than a “customer service representative” you can often negotiate lower or waived fees for yourself.

What I’m currently shopping for is a merchant account with a “virtual terminal” and a payment gateway. The virtual terminal component will let me take “card-not-present” orders. I can have customers give me their information by phone, mail, or in person (like at a trade show) and then process the transaction later through the virtual terminal (a website). This works fine for all of my non-Internet sales, since if the transaction doesn’t go through for some reason, I just don’t ship the products until it is resolved. A virtual terminal is definitely not the way to go for accepting cards at events like craft fairs unless you’re imprinting the card, collecting a billing address and looking at ID for every sale. I could collect Internet orders using a virtual terminal, too, but no customer wants to enter in all their information only to be told their order will actually be processed within the next 24-48 hours. That’s where the payment gateway comes in. A payment gateway, like Authorize or LinkPoint, is what you need to instantly process a credit card through your web site. I know this sounds confusing, but here’s a great article from that explains (and diagrams) everything.

Tomorrow I should finally have everything squared away, at which point I will actually post the gargantuan chart comparing about a dozen merchant services. I may even make a few recommendations. Stay tuned!