What Is an EIN Number and Does My Business Need One?
When starting a new business, registering an LLC or corporation is just the first step. To truly get up and running, there are several more steps to take, such as getting an EIN number for your business. While the process of obtaining an EIN number from the IRS is not complicated, business owners often have questions about what an EIN is and how it differs from other types of Tax ID Numbers.
In this article, we cover what an EIN number is, why your business needs one, and the steps you need to take to obtain one.
What is an EIN Number?
An “Employer Identification Number”, or EIN, is the type of Tax ID number assigned to businesses. The IRS assigns a unique nine-digit EIN number in order to identify a business for federal tax purposes.
Does My Business Need an EIN Number?
Having an EIN number is important for many aspects of running a business beyond just paying federal taxes.
LLCs and corporations need an EIN number in order to complete critical business functions, including:
- Hiring Employees
An LLC or corporation will need an EIN number in order to hire employees in the U.S. A company must use its EIN number to report taxes withheld from employee’s paychecks and to pay employer taxes.
- Opening Business Bank Accounts.
Most banks require LLCs and corporations to obtain an EIN number in order to open a business bank account. Separating your personal finances from your business by opening a business bank account is important to maintaining your personal liability protection.
- Applying for Business Licenses and Permits
Many state and local governments require LLCs and corporations to have an EIN number to apply for business licenses and permits.
How To Get an EIN Number in 3 Steps
Obtaining an EIN number for a business requires filling out and submitting the Form SS-4 application to the IRS. The SS-4 application can be found online at irs.gov/ein.
These are three steps that you need to follow in order to successfully complete and submit the EIN application:
Step 1.) Determine If You Are Eligible
Most businesses need an EIN number in order to pay taxes and hire employees in the U.S. However, the IRS does impose some requirements for companies to apply for an EIN number online.
You may apply for an EIN number online if you meet the following requirements:
- Your business has a principal address located in the U.S. or U.S. Territories;
- The person applying online has a valid Tax ID number from the IRS (Social Security Number or ITIN);
- Only one EIN can be obtained per responsible party per day.
The responsible party is the person that completes the EIN application on behalf of the company. The responsible party is typically the business owner or a person who is authorized to act on behalf of the business, like a manager. If you have multiple businesses, you will only be able to obtain one EIN per day.
Step 2.) Complete the EIN Application
You will need to provide the following information to complete the EIN application:
- Your business’s legal name (the name on your company’s publicly filed incorporation document);
- Your business’s trade name (Doing Business As, or “DBA”) if applicable;
- Your business’s mailing address;
- Your business’s legal structure (LLC, corporation, partnership, sole proprietorship, etc. );
- The date you started doing business or hired employees;
- The type of business the company does; and,
- The name of the responsible party.
Step 3.) Submit the EIN Application to the IRS
The EIN Application can be submitted to the IRS either online, by mail, or by fax. Submitting the application online is the fastest and most convenient method; however, to apply online, the responsible party submitting the application must have a U.S. Social Security Number.
If you do not have a Social Security Number, you can still submit the EIN application by printing out the completed Form SS-4 and either mailing or faxing it to the IRS.
Many business owners find that completing the EIN application is confusing and burdensome. In addition, the IRS can reject the application if you make any mistakes on the Form SS-4, making the process even more time consuming. A registered agent, like IncNow, can often complete the Form SS-4 and submit the EIN application to the IRS for you after incorporating your business.
What Types of Businesses Do Not Need an EIN?
Most businesses need an EIN number to pay business taxes, open bank accounts and report to government agencies. This includes most LLCs, corporations or partnerships. However, sole proprietors may not need to obtain an EIN.
A sole proprietorship does not need an EIN number as long as it does not hire employees. Sole proprietors can use their personal Social Security Number (SSN) or Tax Identification Number (ITIN) to pay business taxes.
How Long Does it Take to Get an EIN?
The amount of time it takes to receive your EIN number from the IRS will depend on how you submit the EIN application.
The IRS will often provide you with your EIN right away if you submit the application online. However, the EIN may take 3 to 5 weeks if the application needs to be submitted by mail or fax.
Do I Need a Social Security Number to Get an EIN?
You do not need a Social Security Number to apply for an EIN number. The person serving as the company’s responsible party must have a Social Security Number in order to submit the EIN application online. However, if you do not have a Social Security Number, you can still submit the application by mail or fax.
Where Can I Find My EIN Number?
The easiest place to find your company’s EIN number is on the EIN confirmation letter provided by the IRS.
You can also find your EIN number on different types of documents and business records. These may include:
- Old federal tax returns;
- Business bank account statements;
- Official IRS tax notices; and,
- Business licenses, permits or other applications.
If you cannot locate any of these documents, the IRS can provide you with your EIN number over the phone if you call their Business and Specialty Tax line.