How to Set Up an Employer Identification Number (EIN)
Recently we went over what an Employer Identification Number (EIN) is. If after reading that you think you are required to have one or would like one for business operations, then the next step is getting one. The EIN is a unique nine-digit code that the IRS assigns to your company. You’ll use it when filing your payroll tax return or business income tax return. You’ll also need your EIN to open a business bank account, apply for a business credit card, or send an application for a business loan.
If you haven’t gotten your EIN yet, now is the best time to do so. Luckily, the application process is quick and easy, and free. You can apply online through the IRS website or you can send it by mail or fax.
How to apply for an EIN
It’s recommended that businesses apply for an EIN when they first launch. However, some choose to apply in preparation for tax season or when applying for a business loan. There are three easy steps to consider when applying for an EIN:
Meet the basic requirements
To apply for an EIN, you must meet two requirements. The first is that your principal business must be situated in the U.S. or U.S. territories. The second is that you or the person applying must possess a valid taxpayer identification number, like a Social Security number.
You’ll be asked to identify the principal activity of your business, for example, real estate, manufacturing, or retail. You must also identify your primary physical location. Providing services to other countries doesn’t mean you do not fulfill these requirements. What matters is that you conduct your primary business activities in the U.S.
Gather the required information
Next, review Form SS-4: Application for Employer Identification Number to ensure you have everything you need to apply. These include names, addresses, and the Social Security number of the responsible person. You’ll also have to know the kind of business entity you are. If your business is a corporation, you must include the state or country where you were incorporated.
Other information you must have to complete the application is the following: the primary reason for applying, the date you started or acquired the business, your primary industry, the highest number and type of employees you expect to hire in the next 12 months, and others. By having all this information ready, you can begin the online application process of securing an EIN.
Send your application
You can apply for an EIN through the IRS website or by fax or direct mail. If you are overseas and hoping to move to the U.S. for business purposes, you can also apply by phone. However, if you are in the U.S., applying online is the simplest and quickest method.
The IRS website has an online EIN assistant that will guide you through the step-by-step form, providing you with links to resources and other information you may need. It’s important to note that only one responsible party can apply for one EIN per business day. After submitting your application online, you’ll receive your EIN right away. Fax applications take four business days, and mailed applications take four weeks to process.
If you’re required to have an EIN or you want one for organizational and business development purposes, the process is fairly simple. If you’re planning to apply for a business financial product or you need one based on the type of business you’re operating, applying for your EIN sooner rather than later is your best bet.
Even if you’re a sole proprietorship or a single-member LLC with no employees, which means you aren’t required to get an EIN, there’s no real downside to having this business tax ID number. By following our guide, you’ll have your EIN when you need it and won’t have to worry about waiting for the application to process. Then, you can move quickly on an opportunity or if tax season snuck up on you.
Beam Financial Group is a San Francisco-based accounting firm offering bookkeeping and accounting services for creative service providers. Our team of professional financial experts provides a holistic approach to understanding your company’s finances, ensuring we can help you run your business confidently. Contact us today to learn more about what we can do for you!