Apply for EIN for S Corp: Everything You Need to Know
An EIN is given to a business and serves as its identifier, similar to a social security number for an individual and its application process goes through IRS.3 min read
If you need to apply for EIN for S corp, the process goes through the IRS. An employer identification number (EIN) is given to a business and serves as its identifier, similar to a social security number for an individual.
Do I Need an EIN for an S Corp?
The S corporation is one of the business formation options. Other similar formations include C corporations and limited liability companies (LLC). Similar to the other types of corporations, S corporations often need employees to run the business and obtain a bank account for the company. These elements and others relating to running a corporation require the owner to obtain an EIN.
The Basics of Business Models
Understanding what defines an S corporation offers a better understanding of why this business formation needs an EIN. Basically, an S corp is a group of people working together to operate a business. An S corporation is more complex than a sole proprietorship and has shareholders who own the company. Due to these factors, an S corporation is never owned and operated by a single individual.
This type of business formation always employs others, which is why it meets the requirements to obtain an EIN. When your business has an EIN, you can legally pay your employees and handle all important tax matters. This number keeps your organization operating legally.
Getting an EIN
After you understand whether your business needs an EIN, the next step is beginning the process of applying for one. Starting a business comes with many complex tasks and factors. Many new business owners get weighed down and overwhelmed by the amount of paperwork that is required.
An S corporation is a type of corporation that can pass its business debt, losses, and income through the organization to its shareholders. The income and losses are then reported by each shareholder on their individual tax return. This avoids double taxation, which is a distinction of a corporation. Pass-through taxation is one of the aspects of an S corporation that sets it apart from other corporations.
The EIN is also referred to as the tax identification number. The IRS issues EINs to businesses across the United States, which the companies can use for several key tax purposes. This number is nine digits and is unique to your business entity.
Do You Need an EIN for an S Corp?
Although S corporations aren't on the list of business entity types that require an EIN, it is helpful to obtain one anyway. The business entity types that do require an EIN are traditional corporations and partnerships. With an EIN for your S corp, you can pursue important business objectives that can help your corporation achieve success. For example, an S corporation might not have employees right away, but you won't be able to hire any or establish payroll until you obtain an EIN.
Other reasons an S corporation owner might need an EIN include:
- Opening a business bank account.
- Applying for regional and local licenses and permits.
- Establishing credit in the company name.
If the business loses its status as an S corp, it would need an EIN immediately as well.
How to Apply for an EIN
The process of applying for an EIN is simple. You can complete the steps by phone or fax, but the preferred method is through the IRS website. Completing the application online will take just a few minutes, as long as you have the information needed within easy reach. After you apply online, you may receive your EIN within a few hours or a few days.
As soon as your business receives its EIN, you can legally start participating in the business activities needed to establish and run your company, such as opening bank accounts, applying for permits, and hiring employees. You can also manage the required tax forms and other documents more efficiently.
EIN for S Corporation
In order to be registered as an S corporation in any state, a business owner must file its articles of incorporation with the secretary of state or other government agency that handles corporation formation. Additionally, S corp owners must file an election form with the IRS that allows the business to pass its deductions, losses, credits, and income through to its shareholders, eliminating the need for the corporation to pay its own taxes.
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