How to Get an EIN for Your Small Business
Starting a new business or purchasing an existing company involves several important steps, including determining whether you need an Employer Identification Number (EIN). This federal tax identification number helps the IRS identify your business and is commonly used when filing tax returns, opening business bank accounts, and handling other business-related matters.
Although not every sole proprietor is required to obtain an EIN, many businesses need one to meet federal tax obligations. Understanding when an EIN is necessary and how to apply can help you prepare your business for operation.
What Is an Employer Identification Number (EIN)?
An Employer Identification Number is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to identify a business or other entity for federal tax purposes.
An EIN serves a role similar to a Social Security number, but it identifies a business rather than an individual. It may be required for tax filings, payroll reporting, business banking, and other administrative activities.
Your state may also issue a separate identification number for state tax filings or business registration. An EIN does not replace those state-specific requirements.
Who Needs an EIN?
Many businesses must obtain an EIN, depending on their legal structure, employees, and tax responsibilities.
You may need an EIN if you:
· Hire employees and must report employment taxes.
· Operate as a partnership or corporation.
· Form an LLC that requires a separate federal tax identification number under the applicable rules.
· File certain federal tax returns, including employment or excise tax returns.
· Establish certain retirement plans.
· Purchase an existing business or undergo a change in ownership or legal structure that requires a new EIN.
· Need an identification number for business banking, licensing, or other business activities.
Sole proprietors without employees may sometimes use their Social Security number for federal tax purposes. However, a sole proprietor may still need or choose to obtain an EIN in certain circumstances.
Before applying, determine your business's legal structure and federal tax classification. An EIN does not automatically establish an LLC, corporation, or tax-exempt organization.
How to Apply for an EIN
The IRS provides several ways to apply for an EIN. For eligible businesses based in the United States, the online application is generally the fastest option and is free when completed directly through the IRS.
Step 1: Determine Whether You Need an EIN
Review your business structure and tax obligations before starting the application. Consider whether you will have employees, file business tax returns, operate as a partnership or corporation, or establish a retirement plan.
You should also determine whether an existing EIN can continue to be used. Changes in ownership or legal structure may require a new number, but not every business change does.
Step 2: Choose an Application Method
Eligible domestic applicants can apply through the IRS online EIN application. Other options include submitting Form SS-4 by fax or mail.
International applicants whose principal place of business is outside the United States generally cannot use the domestic online application. They may apply by telephone, fax, or mail under the IRS's international application procedures.
Important: Applying directly through the IRS is free. Be cautious of third-party websites that charge fees to submit an EIN application.
Step 3: Gather the Required Information
Before starting, prepare the information needed to complete the application. This generally includes:
· The legal name of the business.
· The business's mailing and physical addresses, as applicable.
· The type of legal entity.
· The reason for requesting an EIN.
· The name and taxpayer identification number of the responsible party, when required.
· Information about the business's activities and, where applicable, employees.
The responsible party is generally the individual who owns, controls, or exercises effective control over the entity and its funds and assets. The application must identify the appropriate person rather than simply listing a nominee who helped establish the business.
Step 4: Complete the IRS Application
The online application asks questions about your business's legal structure, the reason for applying, and the responsible party.
You may be asked whether you are starting a new business, hiring employees, opening a bank account, or responding to a change in the business.
Answer each question accurately and consistently with your business formation documents and tax classification. The IRS expects you to determine your entity type before requesting an EIN.
The online application must generally be completed in one session and may expire after a period of inactivity.
Step 5: Receive and Save Your EIN Confirmation
If your eligible online application is approved, the IRS generally issues the EIN immediately. Download or print the confirmation notice and store it securely with your business records.
You may need the EIN for federal tax returns, payroll filings, banking, licensing, and other administrative tasks.
Although the number may be issued immediately, it can take time for the EIN to become fully available in IRS systems. Follow the IRS's instructions before attempting certain electronic filings or payments.
How to Find a Lost or Misplaced EIN
If you previously received an EIN but cannot locate it, you generally do not need to apply for another one simply because the original notice is missing.
Try these steps to recover your existing number:
1. Locate the IRS confirmation notice. Check your original EIN assignment letter or any electronic copy saved when the application was completed.
2. Review previous business tax returns. An EIN is usually shown on the relevant federal tax return.
3. Check business banking records. Contact your bank if you used the EIN to open an account.
4. Review licensing documents. State or local agencies may have records containing your business identification information.
5. Contact the IRS. Call the Business and Specialty Tax Line at 800-829-4933 for assistance locating an EIN. The IRS lists regular telephone hours as Monday through Friday, 7 a.m. to 7 p.m. local time.
Keep your EIN confirmation and related business documents in a secure location so the number is available when you need it.
Can You Cancel an EIN?
An EIN generally remains associated with the business entity to which it was assigned. If you no longer need the number, the IRS can close the associated business account after applicable filing and payment obligations have been addressed.
Closing an IRS business account does not erase the EIN, and the number cannot simply be canceled and reused for another entity.
If your business changes ownership or legal structure, check the IRS rules to determine whether a new EIN is required. The answer depends on the type of entity and the specific change.
Keep Your Business Identification Records Organized
Obtaining an EIN is an important administrative step for many small businesses, but it is only one part of establishing and maintaining a compliant business.
Keep your EIN confirmation, formation documents, tax returns, payroll records, and banking information organized. Review your federal and state requirements as your business grows or changes.
Contnow Tax Preparation LLC can help business owners understand tax preparation requirements and identify tax compliance issues to review with a qualified tax professional.
Before applying: Confirm the latest application procedures and eligibility rules directly with the IRS to ensure you use the appropriate method for your business.
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