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It is important that you get an Employer Identification Number (EIN) no matter what type of business unit you choose. An EIN is required if you hope to hire employees and open a business account. It also provides protection by helping you separate your personal and business finances.
However, as with any legal documentation a business needs to submit, you need to understand the form you need to fill out and complete it completely and accurately. So here we guide you through the process.
Why is it worth getting an EIN
Companies, multi-member LLCs, non-profit organizations and partnerships must have an EIN. However, some business entities, such as sole proprietorships and sole proprietorships, are not required by law to obtain an EIN.
Nevertheless, getting an EIN has benefits for any type of business unit that you are about to see.
As the name suggests, you need an EIN to be able to hire employees. You must state your EIN when registering for employer contributions in your state. If your business is also an LLC, state your EIN to create payrolls, and the IRS uses the number to track payroll taxes.
You will need an EIN to open a business account with most banks. And it is given that you will open a business account to separate your business finances from your personal finances. Also to access benefits such as business loans or lines of credit, perhaps.
Keeping your business and personal finances separate in this way also helps prevent identity theft. You can give your EIN to customers and suppliers instead of your social security number (SSN).
Of course, it is much more risky to distribute your SSN everywhere. Plus, in this case, an EIN adds a level of professionalism and credibility to your business.
Finally, an EIN provides a corporate veil for LLCs. In other words, if the company incurs debt, it protects you from personal liability.
Other cases that require an EIN
You may not have realized it, but there are some other cases where you are required by law to require an EIN, even if you do not intend to hire employees.
If any of the following apply to your business, get an EIN:
The company records excise duties required for certain goods, such as alcohol, tobacco and fuel. single-member LLC that has chosen to be taxed as an S-company or C-company. Your state or local government regulations require you to obtain an EIN. The company has one of the following organizational structures: Farmers’ Cooperative State Trust Exceptions) Mortgage Investment Pipe Plan Administrator.
The investment is necessary to get an EIN
It’s free to get an EIN. Which, of course, is good news.
But there are many details you need to include in your application. So you may be worried about getting it right. Or maybe you do not have time to handle administrative tasks.
In these cases, you may want to invest in an online legal service that can take care of such formalities for you. For example, IncFile will get an EIN for you as part of their gold and platinum package incorporation service.
As part of the service, the company also files organizational articles, creates an operating agreement and takes a number of additional steps necessary to incorporate a company.
3 steps to get an EIN
The EIN application only consists of a form that you can submit online, by fax or by post. However, the form requires a lot of information about the business unit, which we will outline here, along with some additional insights into the application process.
1. Make sure you are eligible
There are just a few criteria you must meet to be eligible for an EIN.
Your main business, also known as the physical location where you conduct business activities, must be located in the United States or the United States. In addition, the applicant must have a valid taxpayer ID, e.g. An SSN.
It is worth noting that you are eligible even if you do business abroad, as long as your primary business activities take place in the United States or a US territory.
In addition, the applicant does not have to be the owner of the business. In accordance with IRS requirements, any responsible party may apply. This includes anyone who manages the company’s finances and an officer or partner in the company.
2. Fill out form SS-4
Form SS-4 is the application form you must submit to the IRS to receive an EIN. At this point, you may want to get help from an online legal service to ensure that you fill out the form fully and correctly.
Here is the information you need to include in Form SS-4:
Company full legal name – If the name contains special characters other than a hyphen or a character, you can spell the character. For example, Tiles.com becomes Tiles Dot Com. You can replace a slash forward or backward with a hyphen. Or you can completely omit the character, e.g. Remove an apostrophe. Company Trade Name – Although EIN is assigned the company formal name, you must include any trade names. For example, you may have formed your business as Sarah Smith Catering, but you operate under the name Sarah’s Sandwiches. Company Mailing Address – The company’s street address if it differs from the mailing address. The name and taxpayer ID of the responsible party – As explained above, this is the person applying for EIN, who may be the business owner. The taxpayer’s identification can be an SSN, EIN or individual taxpayer identification number (ITIN). The latter is the number the IRS gives to those who are not eligible for an SSN. Company Type – Specify whether the company e.g. Is an LLC, a company, sole proprietorship or partnership. If the company is an LLC, include the number of members and whether it was formed in the United States. If it is a company, include the US state or the foreign country in which it was formed. The primary reason for applying for an EIN – There are several options to choose from, e.g. Started new business, Employees, Banking purposes and Changed type of organization. Important Business Dates – These include when the company was formed or acquired plus the last month of the company’s fiscal year. Employee Information – Specify the number and type of employees you expect to have in the next 12 months. If total employee salaries are less than $ 5,000, you can use the form to choose to file annual tax returns instead of quarterly returns. Plus, you need to include the first date employees will be paid, or the first date you paid employees if it was done earlier. Company main industry and activity – This includes a description of the goods or services you provide. If the company has previously applied for an EIN – Include the date of the previous application, if applicable.
3. Sign and send the EIN application
To complete the application, the applicant must of course sign and date the form. The applicant must also include their personal information, ie. address, telephone and fax numbers.
You can submit an application online, by fax or by mail. Those who intend to move to the United States and start a business can also complete the application by phone.
The best way to apply for an EIN is to use the IRS’s EIN Assistant online.
The EIN Assistant website outlines some important information you need to know before filling out the online form. For example, if you Is inactive for 15 minutes, the session ends. Be sure to read this information carefully.
The best thing about doing the application online is that you will receive an EIN as soon as you have completed the application. In contrast, fax applications take about four days and e-mail programs take up to four weeks.
EIN Frequently Asked Questions
Here are the answers to some of the most frequently asked questions about EINs:
Can I change my EIN?
There may come a time when you need a new EIN. For example, if the business owner or structure changes. Let’s say you used to be a one-man business and decide to incorporate.
All you have to do is apply for a new EIN by submitting Form SS-4 by following the instructions above. Be sure to enter the new details and select the appropriate fields. When it e.g. If you ask why you are applying for an EIN, you can select “Changed organization type”.
Note that you do not need a new EIN if you change the company name or location.
Where can I find my EIN?
If you are losing track of your EIN, do not worry as there are many ways you can find the number.
First look at any correspondence you have received from the IRS. You will usually be able to find your EIN in a letter or email. You can also check a previously filed tax return.
Another option is to contact your bank as they may be able to give you your number if you used it to open a business account. Similarly, you may be able to contact a local authority to retrieve your EIN if you used it to acquire a license or permit.
If all else fails, contact the IRS to request your EIN. You can reach them Monday through Friday from 7 a.m. to 7 p.m. at 800-829-4933.
Should I get an EIN before or after forming an LLC?
You need to create your LLC before trying to get an EIN. The reason is that the IRS asks for information about the formation of your business in the EIN application form. You must provide the legal name of your business and the date of creation.
Why was my EIN application rejected?
There are several reasons why you may be denied an EIN. The first is that the name of the device you specified is not unique. This is called a “Reference 101 error”.
However, this should not be a problem if you form the company and register its name with the state before applying for an EIN.
Another possibility is that you have given incorrect information. Let’s say that you e.g. Only include the postal address and it does not match the place where you formed the business. Similarly, your application will be rejected if your application is incomplete.
In addition, if the applicant is already named as the responsible party for another EIN, the application will not go through.
Can I have multiple EINs?
Owners can only have one EIN.
If you run a single business with different divisions, you do not need a separate EIN for each division. You can use an EIN across the entire business unit.
But if you manage several companies, ie. separate business units, each will require its own unique EIN. There is no limit to how many EINs a person can get.
If you have not formed the company legally and registered its name with the state, this is your next step. If you have already done this, you can continue and launch the EIN application.
Do you form an LLC? Along with registering the company and getting an EIN, there are several more important steps you need to perform to strengthen your LLC and ensure that it remains in good working order. Our comprehensive guide to maintaining your LLC has all these steps covered if you would like to take a closer look.
If you are ready to start your business, you need a beautiful website to showcase your business. See our guide to the best website builders to find the one that best suits your needs.