obtain_an_EIN

One question new entrepreneurs often ask themselves is whether or not they need an employer identification number (EIN). More often than not, it is only considered necessary to obtain an EIN if you plan on hiring employees to work for the business. What if an entrepreneur does not plan to hire immediately or in the near future? Then, they may wait to obtain an EIN until they are ready.

However, it is advised that entrepreneurs obtain an EIN sooner rather than later. EINs provide small business owners with benefits that extend beyond hiring employees. The filing process is also fairly straightforward and not as complex as some may imagine.

What’s an employer identification number? What do you need to do to obtain an EIN for your small business? Let’s take a closer look at what entrepreneurs should know about federal tax IDs.

What Is An EIN?

Before we discuss how to obtain an EIN, it’s important that entrepreneurs understand what this asset does for small businesses.

An EIN is a nine-digit number issued by the IRS. It is able to identify and track employer tax accounts when you incorporate or form an LLC for your business. Think of an EIN as a corporate social security number (SSN). You are legally required to identify your small business with one of these federal tax IDs. EINs are less sensitive than SSNs, so many entrepreneurs choose to use it when filling out payroll reports and paying federal taxes.

When Should I Obtain An EIN?

An EIN does much more than allow you to hire employees for your small business. Here’s where else it benefits a business to obtain an EIN.

  • When you form an LLC or incorporate your company. Once a business has been incorporated or forms an LLC, it is considered to be its own legal entity. You, the owner, are officially its employee. Therefore, you’ll need to obtain an EIN so the IRS can keep track of the business and ensure it collects payroll taxes. These rules do subtly change for other entity formations. C Corporations, which did not always need EINs in the past, are now required to file for and obtain an EIN. Sole proprietors may use their SSN as a federal tax ID, but are encouraged to obtain an EIN as a helpful ID backup. Partnership formations must also file for an EIN, as one partner cannot personally use their own SSN when there is another partner in the company.
  • Opening a business bank account. In order to open a bank account under the company’s name, most banks require that you file for an EIN first.
  • Building corporate business credit.
  • Establishing a pension, profit sharing, or retirement plan.
  • Changing your organization type. If you decide to switch entity formations later on, you will need to obtain an EIN. This is necessary because the ownership of the organization has changed.

Is It Always Necessary To Have A New EIN?

There are certain situations in which you may not need to file for a new EIN. These include the following.

  • Business name change. The name of your business changes, but everything else stays the same.
  • New business location or location address change.
  • Operating multiple businesses.

What Do I Need Before I File For An EIN?

Before you begin filing an EIN application, make sure you’re able to answer “yes” to the following questions. Otherwise, your business may not be eligible to obtain an EIN.

  • Is your principle business located in the United States or U.S. territories?
  • Do you have a valid taxpayer identification number? Your SSN is considered a valid taxpayer ID!
  • Is your business legally formed?
  • Do I have a copy of Form SS-4? This is the Application for Employer Identification Number.

How Do I Obtain An EIN With MyCorporation?

Entrepreneurs may use a few avenues in order to file for an EIN. You may submit the fully completed Form SS-4 through mail. Check in with the IRS to ensure you are mailing the application to the proper address. Small business owners may also submit their EIN applications via fax or obtain an EIN over the phone.

However, many entrepreneurs choose to file for an EIN online. A trusted third party online filing service, like MyCorporation, may assist you in completing an EIN application.

Filing an EIN with a third party online filing service is often preferred by entrepreneurs. The entire filing process generally takes no more than 15 minutes to do. You’re also working alongside a trusted, reliable professional that helps guide you through each step and answers questions. As an added bonus, you’ll receive your EIN a bit faster than you would if you filed an application through the mail or fax. The online confirmation arrives as soon as you have completed the application process with us!

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