Getting an EIN Number: Everything You Need to Know
Getting an EIN number can help you identify your business entity. Most companies need this federal employee identification number to conduct business.3 min read
Getting an EIN number can help you identify your business entity. Most companies need this federal employee identification number to conduct business. An EIN is a nine-digit number that refers to only your business or non-profit entity. It is your business’s social security number.
This number allows the IRS to identify your business and attach it to the correct business name for tax purposes. Just a unique business name is not enough.
In addition to ensuring that your business is compliant with the IRS and they are able to identify your filed tax returns, securing an EIN also helps you operate your company more effectively.
Most banks and other financial institutions require companies and non-profits to register for an EIN before opening any accounts or applying for any loans. Most, but not all, states require that new businesses secure an EIN from the IRS in order to make tax payments. It makes some business ventures a lot easier if you apply for an EIN right off the bat.
The IRS only requires corporations and partnerships to register for an EIN, but all businesses should get one. If you plan to be paying employees, you have to have an EIN in order to have a way to legally pay your employees.
If you are a one-person company with no responsibility of paying others, you may be able to get away with running your business as a sole proprietor. Sole proprietors may use their social security number if they would like, but they can also get an EIN for their business purposes. If you are an individual who has hired an employee, such as a household employee, an EIN is required.
In addition to an EIN, your business might also need a state tax ID number, which is a separate number assigned by the state government.
When Should You Register for an EIN?
If one of the following applies to your business, you should register for an EIN:
- It has employees it must pay.
- It files employment tax returns.
- It files excise tax returns.
- It files alcohol, tobacco, and firearms tax returns.
- It withholds taxes on non-wage income for non-resident aliens.
- It is involved with trusts, estates, or real estate mortgage investment conduits.
- It is a non-profit organization.
- It is a farmers’ cooperative.
How to Obtain an EIN
Obtaining an EIN through the IRS is free. There is no need to pay another party for the service. It is not necessarily an easy or quick process, however, so get started now. Now that EIN (Tax ID) obtainment is available via the web, businesses no longer need to apply the “old way” via fax or by mail.
The IRS makes it simple to apply for and obtain an EIN. Your options for doing so include applying online, through fax, via mail, and over the telephone. Most people prefer to obtain an EIN online because it is fairly easy.
No entities are excluded from obtaining an EIN. If your business changes its entity structure, such as changing from an LLC to an S corp, a new EIN is required because a new tax ID is necessary. The IRS treats different entities differently depending on the setup and tax structure. Different entities include: LLCs (Limited Liability Company), Corporation, Partnership, Trusts, Estates of Deceased Individuals, and Non-Profit Organizations.
If you need to change your EIN or other tax ID after it has been assigned, you can call the IRS-EIN line at 1-800-829-4933. You should call and make these changes if any of the following occur:
- The business’s name
- The business’s address
- The date that the business started
- A change in contact information for officers/members
If an LLC has multiple members, a single representative must be named responsible for obtaining a Tax ID number on behalf of the LLC.
Even if the IRS does not require your business to hold an EIN, a company may opt to secure one for privacy purposes. Plus, an EIN is required in order to apply for business licenses.
If you need help with getting an EIN number, 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, Menlo Ventures, and Airbnb.