"How do I get an EIN?" is frequently asked by new businesses.
A business entity's Employer Identification Number (EIN number) is also known as a Federal Tax Identification Number. In most cases, businesses require an EIN. There are a variety of ways to apply for an EIN, and you can now do so online.
Make sure you really need this magic number before we look at how to get it.
An EIN is not required if you run a sole proprietorship without employees. The Government Boss ID Number, or EIN, is an IRS reference number for your business. Your sole proprietorship requires only your Social Security number. An EIN is not required before you hire your first employee.
In the United States, a business structure known as a limited liability company (LLC) shields its owners from personal liability for the company's debts or liabilities.
Keep in mind that each of your states and cities has its own requirements for business licenses. To find out if you need one in your area, you should check with the agencies of your state and city. Depending on your type of business, entity, or level of activity, the requirements in each state can range from paying a small fee to requiring testing, insurance, and bonding.
A C corporation, also known as a c corp, is a legal form of a corporation in which shareholders, or owners, are exempt from taxation.
You must apply for a Federal EIN if you have a partnership, corporation, LLC, or plan to hire employees. Your Federal EIN serves as your business entity's equivalent of a Social Security number for non-sole proprietorships. Banks require a Government EIN to open a financial balance, and your sellers might expect you to give them this number for Structure 1099 reference motivations.
One EIN is all that is required for your company. Your company may operate multiple dba (doing business as) names, but each legal entity should only submit a single application for an EIN. If you have an LLC, you should continue to use your initial EIN even if you change the type of tax return you file. When your company changes ownership, either by incorporating as a sole proprietorship or by transitioning from a sole proprietorship to a partnership, you should only apply for a new number.
One common legal business structure for small businesses is an S corporation or S corp, also known as an S subchapter.
Trusts, pension plans, state or local tax authorities, withholding agents, associations, and other entities use the Federal EIN as well. Since the application for an EIN is meant to cover all of these different scenarios, this causes confusion. If the questions or references on the form don't apply to your company, don't be surprised.