Employer

Employer Identification Number – EIN

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Employer Identification Number (EIN)

One of the essential steps to building your business is to apply for an EIN.  While it may seem like a trivial step, getting your EIN is key to many of the future steps you will take as a business.  Because it is such a crucial component of your future success, it pays to get it early so you don’t have to wait for it later.  

What is an EIN?

An Employer Identification Number, or EIN, is a unique nine-digit number that identifies your business for tax purposes.  Think of it as being similar to a social security number, but for your business.

You’ll need an EIN to open a business banking account, apply for business licenses, and file your taxes.  It’s a necessary component of your business plan and the sooner you address it, the better off you’ll be. The best strategy is to apply for your EIN as soon as you start planning your business.  This way, there are no delays in receiving the appropriate licensing or financing you need to operate successfully.

Who needs an EIN?

The short answer is, (edit: if you expect to open a business bank account) you need an EIN. However, you may also be required to have one if you operate your business as a corporation or partnership – (edit: which means that some types of single-owner businesses such as LLC’s & Sole Proprieter’s may not need one).

It is also helpful to bear in mind that you will need an EIN to apply for things such as business licenses and business banking accounts, so even if your business is still in the planning stages an EIN may be beneficial.  

If you answer yes to any of the following questions, you need an EIN.  

  1. Do you have any employees?
  2. Do you operate your business as a corporation or partnership?
  3. Do you file any of the following tax returns:  Employment, Excise, or Alcohol, Tobacco, and Firearms?
  4. Do you withhold taxes on income, other than wages, paid to a non-resident alien?
  5. Do you have a Keough plan?
  6. Are you a part of any of the following organizations?
    1. Trusts (except certain grantor-owned revocable trusts), IRAs, Exempt Organization Business Income Tax Returns
    2. Estates
    3. Real estate mortgage investment conduits
    4. Non-profit organizations
    5. Farmers’ cooperatives
    6. Plan administrators

How do I apply for an EIN?

The best way to apply for an EIN is to use the IRS’ online EIN Assistant.  Determine your eligibility and submit an application online.  Once your application is complete and validated, you’ll be issued an EIN.  It’s that simple! There is no charge for this service.

You can also apply for an EIN by mail or fax if you prefer.  Bear in mind that if your business is incorporated outside the United States, you will not be eligible to apply for an EIN online, but you can call (267) 941-1099 Monday through Friday from 6 am to 11 pm EST.  .

How long will it take to receive my EIN?

Hands-down the fastest way to get your EIN is online, so that’s your best option if you are on a time crunch.  The IRS states it takes between 1-2 weeks to respond to requests submitted via fax, taking longer if you don’t include a return fax number.  If you apply by mail, expect it to take at least four or five weeks to receive your EIN.

You can see why it would be advantageous to apply for your EIN online as opposed to relying on hard copy methods.  If you need an EIN on a short time frame, online is the way to go.

I don’t have my EIN and I need it!  What do I do?

Had you followed our advice about applying early, this most likely wouldn’t be an issue.  Tsk tsk.   Don’t panic; if you’ve already applied for your EIN (you should have!) simply write “Applied for” and the date you applied on the return.  DO NOT use your social security number for this!  It can create problems later on down the line.

If you don’t have your EIN by the date a deposit is due, send your payment to the service center address for your state.  Make out your check or money order to the Internal Revenue Service and show your name as shown on the SS-4, the kind of tax you are paying, the period covered, and the date you applied for your EIN.  Always include the date you applied!

I got my EIN!  What do I do now?

Congratulations, you’ve completed an essential step for the growth and development of your business!  The next step is to start operating like a business: track your miles and expenses, keep detailed financial records, and don’t leave money on the table by neglecting deductions.  Apply for the necessary business licenses and get a business banking account. Now is the time to build your business from the ground up!

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