Get an EIN by following these easy steps, and you will be ready to start your business in no time. You can also learn more about what this is, how it benefits you, or if you’re wondering why someone would need one of these tax IDs! To function, most companies require an EIN. Getting an EIN should be at the top of your to-do list if you’re launching a new company. Consider an EIN to be a corporate version of a social security number. To rent or purchase a home, acquire a job, or establish a personal bank account, you’ll need a social security number. EINs are the same way. Without an EIN, you won’t be able to hire people, incorporate specific businesses, or open a company checking account. Fortunately, obtaining an EIN is a straightforward process. You may do it in various ways, and you can even acquire an EIN for free. Are you unsure whether you need an EIN? Don’t know where to look for one? You’ve arrived at the correct location. This tutorial will help you through the whole process of obtaining an EIN for your company.
What is an EIN?
The term “employer identification number” refers to a form of tax identification number (TIN). The IRS issues EINs to businesses such as LLCs and Corporations. These unique nine-digit numbers are primarily used for tax reporting. Most banks, credit card companies, and suppliers, on the other hand, will demand an EIN before opening an account or interacting with you. EINs and social security numbers (SSNs) are nine-digit government-issued identity numbers often confused. On the other hand, an EIN is formatted differently from an SSN. EINs begin with two digits, a hyphen, and seven additional digits (12-3456789). SSNs have a three-two-four-digit sequence with two hyphens between them (123-45-6789).
Many other names are used to refer to EINs. Here are some typical EIN synonyms that you’ll come across in many contexts:
- EIN
- Taxpayer identification number
- Tax identification number (ITIN)
- Obtaining a federal tax ID
- Employer identification number issued by the federal government
- Employer identification number
If any of these phrases appear on a form, know that they all pertain to an EIN.
Is an EIN Required for Your Company?
According to the IRS, the following are the general factors used to evaluate if a company need an EIN:
- Is there a workforce at the company?
- Is the company run as a partnership or a corporation?
- Does the company submit employment, excise, or alcohol/tobacco/firearms tax returns?
- Is it true that the company withholds taxes (other than salary) from non-resident aliens?
- Is there a Keogh plan in place at the company?
- Is the company engaged with trusts, IRAs, EOBIRs, estates, real estate mortgage investment conduits, nonprofit organizations, farmers’ cooperatives, or plan administrators?
The IRS says you need an EIN if you answer “yes” to any of these questions. It’s worth noting, though, that any size company, even a single-member LLC, may get an EIN. So let’s go a step further and examine the EIN requirements for various organization kinds. Remember that just because an EIN isn’t necessary doesn’t mean you shouldn’t acquire one.
Requirements for EIN:
Sole proprietorships are a kind of business that a single person runs.
Sole proprietorships are a kind of business that a single person runs. Without employees are not required to obtain an EIN if they answer “no” to all of the other criteria listed above. However, any sole proprietor with employees is necessary to get an EIN. Even though the IRS does not mandate it, many sole owners will still want an EIN to establish a bank account or do other business-related duties. In addition, sole owners without an EIN are obliged to use their SSN on 1099 forms and other company papers, putting them at risk of identity theft.
Single-Member Limited Liability Companies (LLCs)
Single-Member Limited Liability Companies (LLCs) without employees are not required to get an EIN. Again, this is under the assumption that the LLC does not meet any other IRS criteria (such as excise tax, Keogh plans, etc.). Any single-member LLC with employees is required to obtain an EIN. Similar to Sole proprietorships are a kind of business run by a single person., it’s still recommended that you get an EIN for your single-member LLC, even though the IRS does not technically mandate it.
Multi-Member LLCs and Partnerships
If your business is structured as a partnership or multi-member LLC, you are required to obtain an EIN. You’ll need to submit a partnership tax return and provide K-1 tax forms to all LLC members. For this form of reporting and business structure, you’ll need an EIN.
Corporations
The word “corporation” may apply to a variety of various sorts of businesses. S companies, C corporations, and nonprofits are the most popular entity kinds, and all of them are required by the IRS to obtain an EIN for tax reasons. In a nutshell, if you’re forming a company, you’ll need an EIN.
Estates and Trusts
In some instances, EINs are used for specific States and Trusts. But for the purposes of this guide, we’ll stick to diving into EINs for businesses only.
The Benefits of Obtaining an EIN for Your Company
Aside from regulatory obligations, there are many additional reasons to get an EIN. For those of you who fall into the “not needed” category, below are some other instances in which an EIN may be required:
- Establishing a business bank account (most banks will require an EIN)
- You’ll need to build up your company credit to qualify for loans.
- Defending you against identity theft (instead of using your SSN for business purposes)
- Making an application for a company credit card
- Applying for a business credit line
- Obtaining specific types of company licenses
- Forms 1099 (instead of SSN)
- As a freelancer or independent contractor, you must establish credibility.
- Developing a relationship of trust with new suppliers
- Keeping tax penalties at bay
- Having more retirement plan options
As you can see, EINs are used for a lot more than just tax purposes. Remember how we claimed that an EIN isn’t necessarily necessary for a single-member LLC? Take a peek at this US Bank business checking account:
In this scenario, you wouldn’t be able to create a company bank account without an EIN. This means you won’t be able to separate your personal and company costs, which might lead to a whole new set of issues down the line. On the other hand, obtaining an EIN from the start (even if you don’t need one) might help your company expand in the future. For example, let’s imagine you’re now a solo entrepreneur that manages all aspects of your firm on your own. However, if your workload increases, you will need to recruit an employee. You won’t employ somebody legally unless you get an EIN. Rather than waiting and experiencing delays in the process, it’s preferable to be proactive and get an EIN when establishing your company organization. This way, you won’t have to take any additional measures to recruit individuals when you’re ready.
Eligibility and Requirements for an EIN
Now that you know who needs an EIN, what they’re used for, and why you need one, there’s one more thing you should know before applying. Just because you need an EIN doesn’t imply you’re automatically qualified for one (but most people are).
These are the qualifying conditions for acquiring an EIN, according to the IRS:
- Your company is based in the United States or a US territory.
- A valid taxpayer identification number is required of the applicant (usually their social security number)
- Per day, each responsible party is restricted to one EIN.
The individual who owns or manages the business is the “responsible party” (a natural person, not an entity).
How to Obtain a Free Employer Identification Number (EIN)?
It’s simple to get an EIN. You may apply for a free EIN directly with the IRS using one of the following methods:
- Online
- By fax
- By mail
- on the phone (international applicants)
Online applications are accepted.
For most individuals, applying online will be the best choice. The IRS website has a link to the application here. It’s completely free and won’t take up much of your time. However, according to the IRS, you must finish the application in one session. As a result, you won’t be able to start, save your progress, and then complete it later. After 15 minutes of inactivity, your session will automatically terminate. You’ll have to start anew if this occurs.
Because it is so simple, I prefer the online application. First, you need to submit some basic information about your company, such as:
- Structure of the law (sole proprietor, partnership, LLC, corporation, etc.)
- Information about the members
- The state or area in which the company is physically based
- Why are you applying? (to hire employees, banking purposes, new business, etc.)
- The “responsible party information “‘s (you, in most cases)
You can Online applications are accepted. During business hours from 7 a.m. – 10 p.m. EST, Monday through Friday. After your application is approved, you’ll have your EIN straight away and may use it to create a bank account or apply for a company license. The EIN, on the other hand, may take up to two weeks to become a formal part of the IRS’s records. You won’t be able to submit an electronic tax return or make an electronic tax payment until your information is entered into their system.
Fax your application
For those of you who can’t or don’t want to Online applications are accepted., you have the option to send your application via fax. First, you’ll need to print and complete IRS Form SS-4. This form is accessible online, and there are no time limits for sending the fax (unlike the online form). Make sure you read the whole document before submitting it. It might create considerable delays in the process if you answer anything wrong or make a mistake or error. It takes roughly four business days to complete error-free forms. Send the fax to 855-641-6935 if you’re in one of the 50 states or Washington, DC. Fax Form SS-4 to 855-215-1627 (inside the US) or 304-707-9471 (outside the US) if you don’t have a legal home, central office, or principal agency in one of the US states (outside the US).
Send a letter of application.
The application that is sent will take the longest to process. If you’re not in a hurry, you may print and complete Form SS-4 and mail it to the address below: EIN Operation, Internal Revenue Service, Cincinnati, OH 45999
Regardless of your actual location, the postal address stays the same. However, if you don’t have a legal residency or a primary address in the United States after, the attention line to “Attn: EIN International Operation.”
Apply over the phone
If you’re applying for an EIN and your business is located outside of the US, you cannot Online applications are accepted.. Instead, you must call the IRS directly to obtain an EIN as an international applicant. Only foreign candidates have access to this option. In addition, the IRS no longer accepts phone applications from firms that are physically located in the United States. Call 267-941-1099 between 6 a.m. and 11 p.m., Monday through Friday, to apply for an EIN via phone (the number is not toll-free).
Alternatives to Obtaining an EIN
You have another option for acquiring an EIN if you are starting a new firm. To formally establish your firm, you’ll need to submit the necessary paperwork with your state, appoint a registered agent, and complete a few other steps. For this, many individuals choose to hire a company creation service. Regardless of your company type, these online providers will conduct all of the necessary paperwork on your behalf. You may add an EIN filing option to your plan when you join up for a company creation service. Using the same information you provided to organize your LLC or company, the provider will request one from the IRS on your behalf. This service typically comes with a one-time price, but you’re paying for convenience. It’s as easy as ticking a box and letting someone else handle the rest. Inc Authority (a popular company creation service) provides an example:
Depending on the formation service you use, adding an EIN to your purchase may appear a bit different. However, everyone has one, and it’s simple to choose when you’re joining up. In addition, some company formation service plans provide an EIN as part of the deal.
How much does an EIN set you back?
Applying for an EIN is completely free if you go via the IRS directly. Anyone may use the four techniques outlined previously in this article (online, fax, mail, and phone). A fee is generally added to the company formation base cost if you employ a third-party provider. The following is a list of EIN costs from the most popular company creation providers today: The current basic prices for acquiring an EIN from such providers are as follows. EINs are sometimes offered as part of some formation plans or premium packages.
Conclusion
Many firms need employer identification numbers (EINs) in order to operate. Even if your company isn’t legally obliged to get an EIN, it’s still in your best interests to do so. What is the procedure for obtaining an EIN? It’s simple: follow the steps outlined in this tutorial. It is simple and free to get an EIN from the IRS. If you don’t want to deal with the IRS, you can always hire a company formation service to handle the application for you.
Frequently Asked Questions
Can you get an EIN number for free?
A: Yes, you can get an EIN number for free. It usually takes 2-3 weeks to process and take effect.
How does an EIN cost?
A: An EIN cost is not a specific amount; instead, it is the purchase of an entity. You can generally see that you’ll need to fill out your tax return or in the IRS form if you’ll need to fill out if you’re applying for one via their online service.
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