What is an EIN Number? How to Apply For One
Starting a new business can be an overwhelming experience.
But now that your business is finally registered as an LLC, corporation or partnership, the next important step is to get an EIN.
Employee Identification Number or EIN is a nine-digit number which the Internal Revenue Service (IRS) assigns to your business.
In this post, I’ll be covering everything you need to know about EIN and answering questions like
- But why do you need EIN?
- Does every business need to apply for an EIN?
- How to apply?
- Do they expire?
Continue reading to know everything about EIN.
What is an EIN?
As mentioned above, EIN or Employee Identification Number is a unique nine-digit number assigned to a business by the IRS for tax purposes.
The number is in XX-XXXXXXX format.
Think of this EIN as the Social Security Number which individuals have. Most of the businesses need an EIN but some might not.
Once your business registration receives approval, you can then apply for an EIN. Apart from the tax purposes, you also require EIN to
- Apply for business licenses
- Get a credit line
- Open a business bank account
Does Every Business Need an EIN?
As per IRS, a business needs EIN if:
- The business has employees
- The business taxation is as an LLC, partnership, or C corporation
- The business files excise taxes, employment taxes, tobacco, firearm, or alcohol tax returns
- The business has a Keogh plan
- The company withholds taxes on the income which it pays to non-resident aliens
- The business works with trusts, non-profit organizations, employee plans, real estate mortgage investment conduits, estates, or farmers’ cooperatives
Companies that do not belong to any of the categories listed above might still need an EIN to open a business account, apply for business licenses, or get a credit line.
What About Sole Proprietor? Do They Need EIN As Well?
If you do not have any employees in your sole proprietorship, you might not need an EIN. As you will file the income taxes of your business along with your personal taxes, you can use the Social Security Number as business taxpayer ID for tax purposes.
But if you want to form a partnership or LLC or incorporate, you will need an EIN. The same is true if you’re going to file for bankruptcy as well. While a lot of Sole Proprietors are not legally required to have an EIN, they still have one for many reasons.
For instance, many of the independent contractors that function as sole proprietors do have an EIN to protect themselves against identity theft.
When Do You NOT Need a New EIN?
As per IRS, you should not apply for a new EIN if-
- Your corporation or partnership declares bankruptcy
- The business name is changed
- The corporation wants S corporation tax structure
- Business location is changed, or new location/s is added (Use Form 8822 for Address Change)
- Business wants to make changes to its taxation structure
Do EINs Expire?
No, EINs do not expire. The IRS will never assign the same nine numbers to any other business even if the original business shuts down. But while the number does not expire, you will have to apply for a new EIN if you want to change your business structure.
For instance, if you have an EIN as a sole proprietor and want to form an LLC, you need to apply for a new EIN.
How to Apply for EIN?
Applying for EIN is easy and completely free. You can apply online, or by email, fax, or phone. Most businesses prefer applying online. Visit the IRS website where you can find an EIN Assistant which you can use to apply for an EIN.
To apply for EIN, you will have to file an SS-4 form. You will also need your Individual Taxpayer Identification Number (ITIN) or Social Security Number (SSN) to file this form. Moreover, you will also have to provide details about the type of business you are operating or are about to register.
Once your documents are validated, you will receive your EIN within 1-2 working days.
Responsible Party for EIN
When you apply for an EIN, you need to name a ‘Responsible Party’. Irrespective of how many owners or members a business has, there can only be a single Responsible Party. The Responsible Party will be the point of contact between the IRS and your business.
You will need to provide the personal information of the Responsible Party while applying for the EIN online.
What If the EIN is Lost or I Forget the EIN?
Do not panic if you lose or forget your EIN. It is very easy to get it back. Firstly, try to find the IRS notice which businesses receive when they first get their EIN. If you are not able to find it, go through the employee payroll records and bank account information.
Businesses also use EIN in their state account application. You can go through those records as well. You can also check the small business tax returns for your EIN.
The last option is to get in touch with the IRS through their Business and Specialty Tax Line at 1-800-829-4933. TTY/TDD: 1-800-829-4059.
To get your EIN, you will have to provide identifying information when you call the IRS.
For security reasons, the IRS will only provide the EIN to authorized persons. This includes a corporate officer, sole proprietor, member of LLC, a partner in a partnership, or similar roles.
Almost all the registered businesses are legally required to have an EIN. Even a lot of companies that do not need EIN generally apply for one to either open a business bank account or to get local business licenses.
Now that you know what EIN is and whether you need it, you are one step closer to running a business of your own. If you do require the EIN, apply for it as soon as possible to check off another important step from your to-do list as a new business owner. If not, it is still advisable to remember the information or bookmark this post as you might need EIN in the future as your business grows.