What Is an EIN?

An EIN number in Colorado is an abbreviation for Employer Identification Number. The IRS issues these numbers to business entities. Alternate names for an EIN include Federal Tax ID Number, Tax ID Number, and TIN.

Consider an EIN as a Social Security Number for businesses. Like a Social Security Number, an EIN has nine digits. It's easy to differentiate between the two because the format for an EIN is two digits, a hyphen, and then seven digits.

An EIN identifies the company to the IRS. Although it's called an Employer Identification Number, a business doesn't have to have employees to use one.

Businesses use EINs for the following purposes: 

  • Opening business bank accounts 
  • Handling employee payroll
  • Filing taxes 
  • Obtaining business credit cards 
  • Obtaining lines of credit for the business 
  • Applying for business licenses

Before an LLC is approved by the state, it needs to get an EIN. Almost all of the following entities in Colorado are required to obtain an EIN

  • Businesses 
  • Non-profits 
  • Trusts 
  • Estates 

Sole proprietors can use their Social Security Numbers, but many of them use an EIN because it offers added benefits. For example, a sole proprietor can use an EIN instead of a Social Security Number to protect sensitive personal information. The EIN can be used in essential activities related to running a business, including getting the necessary permits and licenses. Even if a business or entity isn't required to have an EIN, it's recommended to do so. 

An entity in Colorado that answers “yes” to any of the following questions is required to have an EIN:

  • Is your business a partnership or corporation? 
  • Will you open a business bank account? 
  • Do you have employees? 
  • Do you operate a non-profit organization, trust, or estate?

In Colorado, there are two types of Tax IDs that you'll probably need: the EIN and the state-level Tax ID.

It's helpful to apply for an EIN as soon as you begin planning to form a business. This prevents delays in getting the necessary finances and proper licenses and opening a business bank account.

Guidelines to Applying for an EIN

Applying for an EIN is free. You can apply for an EIN in one of three ways: 

Fax applications typically take four days to process, and mail-in applications may take up to four weeks. The quickest way to get your EIN is online. Once you complete your online application, you'll get an EIN immediately.

Before you begin an online application, have the LLC member's (or members') Social Security Number or ITIN (Individual Taxpayer Identification Number) handy. U.S. citizens use Social Security Numbers (SSNs), while foreign nationals use ITINs. Foreign nationals who don't have an ITIN will need to apply for an ITIN. Once they have it, then they can apply for an EIN.

Whether you're a single- or multi-member LLC, the online application for obtaining an EIN is very much the same. It also doesn't matter which state your business is in, because getting an EIN is a federal procedure and not done at the state level.

To obtain an EIN for your business in Colorado, begin by selecting the legal structure of the entity you're applying for. You'll need the correct, legal name of the business, trust, or non-profit to ensure the EIN is issued for the correct name. The name you apply for should match the legal name as it currently exists or as it will be registered in your formation documents. 

You must disclose the name of your Responsible Party, that is, the person who acts as the responsible party for the business or entity. Your application must also disclose the legal name and SSN or ITIN of the entity's principal officer, who is the person responsible for controlling, directing, and managing funds and assets for the entity.

You must supply the physical address of the business, which cannot be a P.O. box. The application must also have a valid phone number and email address, so that the IRS can reach someone in the business in case corrections are needed.

If you need help with an EIN in Colorado or another state, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.