How Do You Get Your Company an EIN Number?
If you run a business, you need a federal tax number, or an EIN, that you can use for filing taxes and other important business activities.
An EIN or Employer Identification Number is a number given to businesses by the IRS. It can be used by a sole proprietor, a partnership, churches and other organizations, and estates for the purpose of tax identification. If you’re running a business that sells goods or services, you’ll probably need one of these to fill out business forms.
It’s actually fairly simple to get your EIN, and you can even apply online at the IRS website.
Why You Need an EIN
A common question is “why you can’t use your Social Security Number instead of the EIN,” and the main reason is to differentiate personal taxes from business ones. If you are providing services on your own, you can usually use your social security number or Tax Information Number, but if you are actually building a proper business, it’s best to do things right from the start and get your EIN.
Your tax ID number will be needed to set up a business bank account and for filling out many business related forms, so it’s a good thing to have.
Applying for Your EIN
It’s not that difficult to apply for an Employer Identification Number, but it does take a little time. Fortunately, you can apply online.
First, you will need to download the SS-4 form, which can be found on the IRS website. If you can’t find this, look at the most used documents on the upper left of the website. This form is the one that has to be filled out in order to get your tax number.
Next you will need to fill out the form. This requires some research beforehand, since you need to know that you have a name that you can use. This can be checked on a search tool for business names in the U.S. Once you know that your business name is unique and you can register it, you are ready to fill in the forms.
Legal Entity: This is where you will write your business name, the same one you just checked for originality. This is the name that all your transactions will refer to, so it needs to be correct.
Trade Name: Not all businesses operate under the legal entity name. You can choose a different name with the “doing business as” section. For example, the legal entity might be “Johnson Corporation” and it could be doing business as “Johnson Pharmacies.”
Responsible Party: You need to list someone who is responsible for the taxes and other financial information within the business. Usually, that will be the business owner, but if there are several partners, you’ll need to choose one to serve this purpose.
Type of Entity: If you are creating an LLC, you’ll need to fill out the section of the form that is dedicated to this. There are several business types including a general partnership LLC, LLP, etc. Choose the one that fits best for this section. You can also choose “Sole proprietor” and skip several areas on the forms.
You will also be required to give a short description of your business, which can just be a few words to quickly describe it. There’s no need to go into great detail, just give the basics.
On these forms, you will also be asked to choose a year end date. For most companies this would be December 31, but you might want a different date. Discuss with an accountant what your options are and decide whether you want to change the usual date or keep it the same.
Tips for Success
To speed the entire process up, you will probably want to fill out the form and print it, even if you choose to apply by phone or online. It’s a good idea to have the information in front of you and to ensure that you have a copy for your records.
Do everything necessary ahead of time so you can just sit down and fill in the form. This includes registering your business name and talking to an accountant about any financial questions you might have. Keep all this information on hand so you can refer to it as necessary.
When you have completed the form, either online or via phone, you’ll be given your EIN number. There’s no waiting period; you just have to submit all the right information to get it. Once you have your number, you can sign up for a business bank account and use it in any other transactions as necessary. Your EIN will also be confirmed via mail, so make sure you keep this in a safe place.
Your EIN will come in handy whenever you’re doing business related paperwork, so having it on hand is a good idea. If you aren’t sure that you need a new tax number, talk to an accountant, but a general rule of thumb is that you should get one if you are in doubt.