When you start your new business, you make a lot of decisions about how it will be presented to the public. Coming up with the perfect name means customers will take note of your new company and keep coming back.
Your corporate moniker also will be key to your business branding and marketing.
But there’s another identification component that’s just as crucial. It’s the Employer Identification Number, or EIN, that you’ll need when you comply with the various tax responsibilities you now face as boss.
An EIN basically is your corporate entity’s equivalent of an individual’s Social Security number (SSN). Like an SSN, an EIN also is a unique nine-digit number.
But the Internal Revenue Service, not the Social Security Administration, assigns businesses their EINs. And the EIN format is 12-3456789 instead of 123-45-6789.
Quick aside. The EIN format also is the latest belated By the Numbers figure, since I wasn't able to post over the weekend due to technical problems.
EINs required: You’ll need an EIN to hire employees, apply for appropriate business licenses, open a company bank account, set up a retirement plan, and file your various business taxes.
EINs typically are used by corporations, partnerships, and limited liability companies (LLCs).
However, even a sole proprietor might want to get an EIN. This will help you formally separate your personal and business finances and taxes.
Getting an EIN: While an EIN is an important part of your company, getting one is not difficult. It’s also free.
In fact, the IRS has announced that applying for an EIN actually just got easier. The tax agency has updated the online tool that businesses can use to apply for an EIN.
While the online EIN tool has a new look, the IRS says its overall functionality is the same.
Here’s a quick review of the EIN application process.
Make sure you can use the online EIN tool: You can use IRS.gov’s online EIN tool if the following three conditions apply.
- Your principal place of business is in the United States or a U.S. territory.
- You are the responsible party in control of the business entity or are its authorized representative.
- You have the responsible party’s Social Security or individual taxpayer ID number (ITIN).
Form your business entity before you apply for an EIN: If you’re creating a legal business structure, register it with your state before you apply for an EIN.
If you don’t form your entity with your state first, the IRS warns that your EIN application may be delayed.
Gather your EIN application information: Before you click over to the IRS’ online EIN tool, gather the information that you’ll need to apply for the number.
Having the application information handy is important because you must complete the online application in one session. You cannot save partial entries and return later to finish the application.
Also, the IRS notes that for security purposes an online EIN application session expires after 15 minutes of inactivity. If that happens, you must restart the process.
So, have at the ready the following before you apply online for an EIN.
- The full legal name of your business and any trade names or doing business as (DBA) names.
- The mailing address and physical address of your business.
- Your entity type (corporation, LLC, etc.) and reason for applying for the EIN (for example, you will be hiring employees).
- Your business’ primary activities and how many employees you expect to have in the first year.
The IRS also recommends that if you don’t already have Adobe Reader on your computer, install it before beginning the application process. That way you can receive your EIN confirmation letter online.
Receiving your EIN: The IRS' online EIN tool is available Monday to Friday, 7 a.m. to 10 p.m. Eastern time. And issuance via this method is fast.
You will get your online business tax ID number EIN immediately upon verification.
You also can immediately start using it for most business needs.
Other EIN options: If you can't apply online (for example, your business is outside the United States), you can apply by phone, fax or mail.
Call (267) 941-1099 between 6 a.m. and 11 p.m. Eastern time, Monday through Friday, to obtain an EIN. Note, this is not a toll-free number.
Or use the IRS' Fax-TIN program, which is available 24 hours a day, 7 days a week.
Here, you complete IRS Form SS-4, Application for Employer Identification Number (EIN), and fax it to the appropriate number. You should receive your EIN by fax generally within four business days.
While the EIN online application assistant will walk you through the process, you can find more about this tax ID number and getting one by reviewing IRS Publication 1635, Understanding Your EIN.
You also might find these items of interest:
- Being the boss tax basics
- Deciding whether to convert your hobby to a business
- Work Opportunity Tax Credit helps businesses meet staffing needs and cut taxes
