An EIN, or Employer Identification Number (also known as a Federal Tax Identification Number), is the way that the IRS identifies your business. Business owners use their EINs like they would use their Social Security numbers. Before business owners can properly function as a legal entity, they must first obtain this important number.
Do I Need an EIN?
If your business meets any of the following IRS requirements, it must have an EIN:
- If your company has employees it must apply for an EIN.
- If your business is classified as a partnership or as a corporation.
- If you have a Keogh Plan (tax deferred pension plan for self-employed individuals or unincorporated organizations for retirement).
- If your business is involved with any of the companies listed on the IRS website.
Business owners may also need an EIN for other purposes which may include:
- Applying for a credit card for your business.
- Opening a bank account in the name of your business.
- Applying for business permits.
- Furnishing independent contractors.
- Acquiring privacy that will decrease the usage of your own personal social security number.
How Do I Apply for an EIN?
The IRS allows for any business to apply for an EIN for free on its website. The online application process can be fairly seamless, provided that you fully understand the questions that are being asked. Generally if you apply for an EIN Monday – Friday, you will receive an EIN immediately. However, if the entity applying for an EIN is owned by another entity (i.e. a newly formed LLC that is owned by a parent LLC), you cannot obtain the EIN via the IRS website. You must contact the IRS via fax or mail.
The IRS requires that the business owner disclose their name and taxpayer ID number. This person could be a general partner, grantor, principal officer, owner, or trustor.
Can I Cancel My EIN?
Once an EIN is assigned to your business, you may not cancel it even if the EIN is never used. Nor can it be assigned to another business, even if that business is related to the original business. However, the IRS can close the account upon request. Once closed, the account can be reopened by writing to the IRS.
Business Formation With Safe Shield
To summarize: before business owners can properly function as a legal entity, they must first obtain an EIN. We can guide you through this process in a comprehensive and expedient manner. We encourage you to learn more about what we provide within our Business Formation System, or schedule a phone call with one of our experts.