Do you need an EIN? Do you know if you need an EIN?
EIN is short for Employer Identification Number and it’s a number that the IRS uses to identify a business. It’s the business version of a social security number (SSN) and you’ll need one if you have any form of business other than a sole proprietorship (and even then you might need one). This includes all corporations, partnerships, and LLCs.
If you are a sole proprietor then you’ll need an EIN to be able to:
- hire employees
- have a Keogh or Solo 401(k) retirement plan
- buy or inherit a business, even if you operate it as a sole proprietorship
- incorporate or form a partnership or LLC
- file your business for bankruptcy
Even if you don’t need an EIN, it won’t hurt to get one. The alternative to using an EIN for business taxes is to use your SSN (and only if you’re a sole proprietor). This could put you at risk for identity theft if your tax forms are stolen. Having an EIN can also establish you as a business instead of an individual. It’s also often required by banks to open a business account.
So how do you get one?
Well, this is about the easiest thing you’ll ever have to do that’s related to the IRS or taxes. Just follow the steps below for the easy method.
- Go to the IRS website at www.irs.gov. If you use the link here you’ll go directly to the IRS page with information for small business taxes and a link to apply for an EIN online.
- Once you’re at the correct page to apply for an EIN online, click on the APPLY ONLINE NOW link at the bottom or the page. Or click on the link here to bypass step 1 (the link in step 1 does get you to some good resources for small business and self employment taxes).
- Now click on “Begin Application.”
- Now just follow the steps as shown on the web page. You’ll choose your legal structure, select how many members your business has and the state where it’s located, and then they’ll ask for some other information specific to your business. The whole process will take you anywhere from 5 to 30 minutes.
- Once you get through these steps, you’ll get your EIN immediately. And the best part is, it’s FREE.
Now, if you don’t want to submit your information online you can fill out a physical form and mail it in. You can find that form here and submit it by mail or fax. You’ll also have to apply this way if the owner of your new business is another business or entity with an EIN that they received using the online application.
There is one thing you should be aware of when applying for an EIN. They’ve put a major limitation on how many EIN’s you can apply for in a given time period. Their cap is only one per day. So you’ll have to limit yourself to starting no more than one business per day. I hope you can handle that.
So there it is, EIN’s in a nutshell. Now get out there and start your business.
What are you waiting for?