An Employer Identification Number is a nine-digit number that identifies your business. It works much the same way your social security number does. If your company has employees, is a corporation or partnership, has a Keogh Plan or fits one of several other situations, it must have its own EIN. Even if you don’t fit the criteria to require one, you may still want to apply for one. An EIN makes it possible for you to open a company bank account, apply for credit for your business, obtain business permits and provide 1099 forms for any independent contractors you work with.
Employer Identification Numbers for Privacy
Your own privacy is another big reason to consider applying for an EIN for your business. Without an EIN, you may be required to supply your personal social security number for some business dealings. Freely giving out your personal identifying information could make you vulnerable to identity theft. An EIN prevents you from needing to give clients or other individuals your social security number.
EIN and the Name You Do Business Under
When beginning the application process to obtain your Employer Identification Number, ensure you are providing the correct information. This is especially important if you are also filing for a DBA. A DBA — Doing Business As — is a form that allows your company to operate under a name other than its legal name. While not every business requires a DBA, it can be beneficial for several reasons. A DBA prevents you from doing business as your personal name if you have a sole proprietorship. It is also a good idea if you have a partnership or corporation.
How to Obtain an EIN
Once you apply for your DBA for apply for LLC status, you can begin your EIN application. Although you can file the forms at the local IRS office or by sending them via postal mail, most business owners choose to apply for a federal EIN number online. Business owners who file the application online with GovDocFiling typically receive their nine-digit EIN within a few days.
Filling out an EIN application is one of the first steps to establishing a small business, corporation, or sole proprietorship.
An Employer Identification Number (EIN), sometimes called a Federal Tax ID number, is a nine-digit number assigned by the Internal Revenue Service (IRS) and used to identify different types of business entities in the U.S.
Depending on the type of business entity established, an EIN will grant certain benefits unique to the business type, and will allow you as an individual to separate your personal identity from some of the legal and financial responsibilities of the business—in this way, an EIN is like a Social Security number for your business.
Not all businesses or individuals establishing a business entity require an EIN application, but it’s important to know when and if you need one, as many business entities are legally required to apply for a Federal Tax ID.
Should You Complete an EIN Application?
There are different circumstances for which you will be legally required to fill out an EIN application.
Common circumstances include, but are not limited to:
- When/if you take on a single employee
- The establishment of either a corporation or a partnership
- A sole proprietors/individual wishes to obtain a bank account or credit in the name of the business
- In the event that income, taxes, other than wages are paid to a non-resident alien
- The establishment of a tax-deferred pension plan, also called a Koegh plan
- Business involvement with organizations that include trusts, IRAs, estates, non-profits, farmers cooperatives, and plan administrators
To learn more about EIN applications, like whether you should complete an EIN application or not, contact us today. You may also choose to complete an EIN application today, using our simplified online EIN application.