How to Get an EIN Number

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To legally hire employees, open a business bank account, and protect yourself from liability and identity theft, you'll need to obtain an Employer Identification Number before starting a new business. Discover the significance of an EIN and how to obtain one.

 

What Is an EIN Number?

An Employer Identification Number (EIN), also known as a Federal Tax Identification Number (FEIN), is a nine-digit number assigned to a new business by the Internal Revenue Service (IRS) for tax purposes. It functions as a Tax Identification Number (TIN), similar to but distinct from your Social Security number (SSN) or Individual Taxpayer Identification Number. When filing taxes, include your Federal Employer Identification Number on your business tax return.

 

Why Are EIN Numbers Important?

Whether you own a large corporation or a small business, if you have employees, operate as a partnership, or withhold taxes from income, your company will require a federal tax ID number. An EIN enables you to:

Apply for business licenses: A business license is required before you can legally operate as a business owner. An EIN enables business owners to apply for necessary state and federal licenses.

Submit a business tax return: An EIN allows you to file a separate tax return from your personal taxes, depending on the nature of your business. Even if your company qualifies for tax-exempt status as a nonprofit organization, you'll need an EIN for your tax forms.

Open a business bank account or apply for credit: An EIN is required to open a business bank account or apply for a business credit card.

Protect yourself from liability: Separating your business finances from your personal finances reduces your liability as the responsible party. With an EIN, any financial issues you encounter affect only your business, and you can protect your personal assets from lawsuits.

Reduces the possibility of identity theft: EINs, unlike Social Security numbers, do not require protection from potential identity thieves, keeping your personal information safe.

 

Who Requires an EIN Number?

Under certain conditions, the following business structures require an EIN Number:

Multi-member limited liability companies or partnerships: If your business is a multimember LLC or a partnership, you must have an EIN in order to file a partnership tax return.

Organizations for charitable purposes: Even if your nonprofit organization is tax-exempt, you must have an EIN in order to file the necessary tax forms.

S-corporation: If you own an S-Corporation, you must report your income to the IRS through the company's shareholders and must obtain an EIN for these activities.

Self-employed people: Certain self-employed individuals who identify as subcontractors may require an EIN in order for their employers to properly process their business income.

Single-member LLC: A single-member LLC means you've created a legally distinct line between yourself and your company, even if you don't have any employees. If you even have one employee, you must obtain an EIN. You do not need an Employer Identification Number if you do not have employees or excise tax liability; however, you may need one to open a business bank account or obtain business credit.

Sole proprietorships with one or more employees must obtain an EIN. You do not need an EIN if you do not have employees (or file excise or pension plan tax returns). Although you can file your taxes as an individual using your Social Security number, you may need an EIN to open a business bank account or obtain business credit.

Trusts and estates: For tax purposes, some trusts and estates require EINs.

 

How to Get an EIN Number

To obtain a new EIN, visit the IRS website (irs.gov) and download and submit Form SS-4: Application for Employer Identification Number for free, or apply by fax or mail; the IRS will assign you a number immediately. The EIN application requests information about you and your business, such as your legal name, business name, company type, reason for applying, and a valid taxpayer identification number.

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