Most businesses need an employer identification number EIN from the Internal Revenue Service (IRS). Suppose you’re about to start a new business. In that case, you must be wondering what an employer identification number is, if your business is eligible, and, more importantly, how to apply for it if you are.
Let’s help you find out more about the employer identification number, how to apply for it, the benefits of an EIN, and some business formation services that can help you get an EIN.
What is the Employer Identification Number (EIN)?
The Employer Identification Number EIN is a federal tax ID number the IRS assigns to your business. In short, the EIN is a taxpayer identification number for a business entity.
Most businesses need this number to pay taxes, open a business bank account, hire employees, and apply for licenses and permits.
The purpose of the EIN is tax administration only, according to the IRS website. So, your EIN is a must-have federal tax ID to meet your tax obligations for your business in the United States.
Do you Need an Employer Identification Number (EIN)?
The IRS has listed the following criteria on the official website to help businesses figure out which business entities need an EIN.
- You have employees
- You operate your business as a corporation or a partnership.
- You file any of these tax returns: Employment, Excise, or Alcohol, Tobacco, and Firearms
- You withhold taxes on income, other than wages, paid to a non-resident alien
- You have a Keogh plan
- You’re involved in the following types of organizations:
- Trusts, except certain grantor-owned revocable trusts, IRAs, Exempt Organization Business Income Tax Returns
- Estates
- Real estate mortgage investment conduits
- Non-profit organizations
- Farmers’ cooperatives
- Plan administrators
A sole proprietorship or a single-member LLC doesn’t need an EIN. An EIN is only required if a business entity meets the abovementioned criteria. As a sole proprietor, however, you will need to obtain a new EIN if you are subject to bankruptcy, inherit an existing business, incorporate, or operate as a partnership.
If you don’t need to have an EIN, you can use your Social Security Number when you file for income taxes. It’s important to note that you can get an EIN even if you’re not eligible, and there are good reasons to do this, as we’ll explain later in this article.
How to Apply for an EIN
If you want an EIN for your business, you must wonder about the easiest way to get it. We’ll share several methods for getting an EIN.
Fax
You must fax the completed form (Form SS-4) to the fax number listed on the IRS website. Provide your fax number, and you will receive a fax with your new EIN within 4 business days.
You can send your SS-4 form through snail mail, but please note that the processing of EIN applications sent through the mail will take approximately four weeks.
Telephone for International Applicants
The IRS provides this number for international applicants: 267-941-1099. The number is not a toll-free number. You can call from 6:00 AM to 11:00 PM Eastern Time from Monday to Friday.
You can submit an EIN application and get your EIN online or through business formation service providers. We’ll explain this in detail in the following sections.
How to Apply for an EIN Online Via the IRS
Applying for an EIN through the IRS website has never been easier. You get the EIN right away.
Step 1: Are You Eligible to Apply Online?
You can apply online only if your principal business is in the United States or US territories, for individuals with legal residence in the US, and if you have a valid taxpayer identification number (SSN, ITIN). The IRS limits the application of EIN to one responsible party per day.
According to the IRS, a responsible party is ” the person who ultimately owns or controls the entity or who exercises ultimate effective control over the entity. Unless the applicant is a government entity, the responsible party must be an individual (i.e., a natural person), not an entity.”
Step 2: Submit an Online Application
You can submit an online application through the IRS website, but ensure you have all the information you need because you only have one session to complete your application. The online session expires after 15 minutes of inactivity.
Step 3: Receive Your EIN
After completing your application, you will immediately receive your EIN. After that, you can easily download or print it.
How to Get an EIN through Business Formation Service Providers
For small businesses, the process of starting a new and preparing all the paperwork required can be hectic and inconvenient. Suppose you’re not interested in filing the SS-4 form or reviewing the details of the IRS website and other business formation and paperwork rules. In that case, you could check the services of business formation service providers.
What is Business Formation?
Business formation services providers help business owners start a business, like finishing the paperwork, helping you decide which business type or entity is suitable for you (LLC, corporation, etc.), and helping with registration, licensing, permits, etc.
Services of Business Formation
Listed below are some of the services that business formation service providers offer. Note this is not a comprehensive list.
- EIN
- Business formation services like LLCs, corporations, nonprofits
- Registered agent service
- Virtual address
- Business License or Permit
- A business address in any state of your choice
Business Formation Service Providers to Help You Get an EIN
Business formation service providers include Incfile, Zenbusiness, LegalZoom, Northwest Registered Agent, and many others.
Why Businesses Should Have an EIN?
You now know about an EIN and if your business is eligible. Now, let’s see the benefits of having an EIN.
Protect yourself from Identity Theft.
First, an EIN helps you separate your personal from business finances. You don’t have to provide your social security number to vendors or clients when you have an EIN. Keeping your social security number private decreases the chance of someone stealing your identity.
Easily Apply for Business Loans and Establish Credit for your Business
You may need to apply for a loan if you want to grow your business and expand. Having an EIN can significantly speed up the process. While you can apply for a loan through business permits and licenses, some lenders need you to have a business bank account to apply.
You can’t open a business bank account without an EIN. So, having an EIN from the beginning helps you when you apply for a loan.
Also, when you have a business bank account, you get credit for your business, which will help you apply for and improve your chances of getting a loan.
Protection of Assets
One of the ways to protect your assets is to never apply for a personal loan for your business. An EIN protects your personal assets because your business finances are separate from your personal finances.
EIN Number FAQs
Do I need an EIN number for my business?
It depends on the type of business you have and your business structure. If you have employees, you’ll need an EIN. If you’re a sole proprietor or a single-member LLC, you may only need an EIN if you’re required to file certain taxes.
How do I apply for an EIN number?
You can apply for an EIN online, by mail, fax, or by phone. Online application is the fastest and easiest way to obtain an EIN.
How long does it take to get an EIN?
If you apply online, you’ll get your EIN immediately. However, if you apply by mail, fax, or phone, receiving your EIN can take up to four weeks.
Can I change my EIN after I have obtained it?
Once you have an EIN, you cannot change it. But if you have a name change, business structure change, or other changes that affect your EIN, you will need to apply for a new one.
What information do I need to provide to get an EIN?
You will need to provide your business name and address, the name and social security number of the business owner or responsible party, and other information depending on your business structure.
How much does it cost to get an EIN?
Applying for an EIN is free.
Is there an expiration date for an EIN?
No, EIN numbers do not expire or need to be renewed. However, if your business structure changes (e.g., from a sole proprietorship to a corporation), you may need to apply for a new EIN number.
What if I lose or forget my EIN number?
You can retrieve your EIN number by contacting the IRS’s Business and Specialty Tax Line at 1-800-829-4933. Make sure to have your business information on hand when calling.
In Conclusion
Having an EIN is indispensable for businesses for many reasons. You can apply directly through the IRS. Suppose you want someone else to worry about the details. In that case, you can use business formation service providers to help you with business formation and all the related paperwork, including applying for an EIN.
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