At CorpNet, we field a lot of questions centered on what aspiring entrepreneurs need to do from an IRS-standpoint to start a business. Almost daily, I see inquiries arrive about obtaining an EIN (Employer Identification Number). I’m glad people ask about that because it is indeed an important item to check off a startup’s to-do list.
What Is An Employer Identification Number?
You may see EINs also referred to as “Federal ID number,” “Tax ID Number,” or Federal Tax ID Number.” It is a nine-digit number used for tax filing and reporting and for other business documentation purposes. Rather than using your Social Security Number, your EIN can be used to obtain business licenses and permits, apply for business credit cards, and set up business bank accounts.
An EIN helps establish a separation between your business and your personal self—which can help provide some liability protection for your personal assets. It also offers some privacy protection. If you work as a contractor, sharing your EIN rather than your SSN with everyone you do business with minimizes the risk of identity theft. The fewer people that see your SSN, the less open your identity is to being stolen.
Be aware, however, that if you’re operating your business as a sole proprietor or a single-member LLC that’s considered a “disregarded entity,” the IRS requires you use your personal tax identification number on any W-9 forms that you issue to customers. This is because your business’s profits and losses flow to your personal tax returns. A way to protect your identity in this situation is to obtain an EIN for yourself as an individual, and use that rather than your personal SSN on your W-9s and income tax filing forms.
Do I Need An EIN?
Great question! Depending on your circumstances, you may have no choice but to obtain an Employer Identification Number for your business.
The IRS requires an EIN if:
- You have employees.
- Your business operates as a partnership or corporation.
- You have a Keogh plan (tax-deferred pension plan for the self-employed).
- You withhold taxes on income, other than wages, paid to a non-resident alien.
- You’re involved with any of the following: estates, most types of trusts, farmers’ cooperatives, plan administrators, non-profit organizations, and real estate mortgage investment conduits.
- You file certain types of tax returns, including Employment, Excise, or Alcohol, Tobacco and Firearms.
How To Get An EIN?
As of May 13, 2019, the IRS allows only individuals with an SSN or ITIN to be the “responsible party” on EIN applications. Entities may not use their existing EINs to obtain additional EINs.
I think you’ll be happy to know that, unlike some aspects of starting a business, getting an Employer Identification Number is quite easy.
- Online – If your business is located within the United States (or U.S. Territories) and you have a valid taxpayer identification number (e.g., Social Security Number, Individual Taxpayer Identification Number (ITIN), or other EIN), you can apply for an EIN online through the IRS website. However, note that the IRS cannot process your online application request if your business’s responsible party is an entity that previously obtained an EIN via the Internet. In that situation, you’ll need to apply using one of the other available methods. They include:
- By Fax – Fax the completed Form SS-4 application to the appropriate IRS service center fax number for your state.
- By Mail – Complete Form SS-4 and mail it to the IRS at the address they provide.
- By Phone – If you’re an international applicant, you may call the IRS at 267-941-1099 to obtain your EIN. If you ask someone to call on your behalf, that person must be authorized to receive the EIN and answer questions regarding Form SS-4.
While it’s simple enough to apply, you can avoid the hassle of “yet one more thing to do” by asking CorpNet to complete the application for you as we’re handling your other business registration filings.
What Information Must I Provide To Get An EIN?
On your application for an Employer Identification Number, some of the information you’ll need to provide includes:
- The legal name of the business entity or the individual for whom the EIN is being requested (and the trade name of the business if it’s different than that entity)
- The name of the executor, administrator, trustee, or “care of” entity
- Mailing address
- Physical street address
- Name of responsible party and that person’s SSN or ITIN
- Type of legal entity
- Reason for applying for an EIN
- Date your business was started or acquired
- Closing month of your accounting year
- Maximum number of employees expected within the next year
- Principal activity of your business and main line of products sold, work done, or services provided
- Third Party Designee (if you want to authorize someone else to receive your EIN and answer questions about your application)
For more information about what you need to provide to the IRS when requesting an EIN, see the detailed instructions included with the SS-4 form.
What Is the Cost Of An EIN?
I’m happy to share more good news; the IRS issues EINs at no charge. Asking an online business document filing service, like CorpNet, to apply on your behalf will cost you a little something. But the peace of mind that it will be done correctly and on time can be well worth the nominal fee.
How Long Will It Take To Get My Employer Identification Number?
By applying online, you can usually get an EIN within 24 hours. If you complete IRS Form SS-4 and fax it to the IRS, you will typically have your EIN in less than one week. For applications sent by mail, expect to wait up to four weeks for your EIN.
Realize that any mistakes in your paperwork could delay the process, so be extra careful to have all of your i’s dotted and t’s crossed!
As you’re starting your own business, don’t leave your business formation registration and other important filings—like applying for your EIN—to chance. There’s far too much at stake!
Contact my team at CorpNet.com for a free business consultation. We’re here to help you obtain your EIN and handle all the other paperwork needed to launch your business now and position it for great things in the future.