If you own a business in the United States, you will likely need an EIN- Employer Identification Number. First let’s learn a little bit about it and then see how to get an EIN.
What is an EIN?
An Employer Identification Number, also called a Federal Employer Identification Number (FEIN)- since states also sometimes issue business ID numbers- is a unique none-digit number issued to businesses by the IRS, for tax reporting and banking purposes.
When used only for identification, the EIN is also referred to as Tax Identification Number (TIN).
Just like social security number for individuals, each business has a unique EIN and that remains unchanged throughout.
All business structures- whether Sole Proprietorship, LLC, S-Corp, Partnership, C-Corp, Trusts, Estates, Government Agencies- are eligible to get an EIN.
An individual, who is a business owner, either as a Sole Proprietor or single-member LLC, who has no employees, can use their Social Security Number for tax reporting purposes. However, tax professionals recommend even such individuals use their EIN instead- to avoid the security risk of having their SSN widely distributed to different entities.
Who needs an EIN?
- A business which has employees
- If you file Employment Taxes
- A business structured as a corporation or partnership
- If you want to obtain business licenses
- If you want to open a business bank account
- If you want to start a business retirement plan- such as a 401(k), you will need an EIN
How to get an EIN?
You can get an EIN for free from the IRS. Though there are provisions for applications by mail, online application is the easiest and quickest format.
It takes only a few minutes to complete and you have your EIN immediately. You have to complete the application in one session since there is no way to save and return to it. So do it when you have 10 uninterrupted minutes (preferably not when homeschooling a first grader).
The only funny thing is that you can do the online application only during IRS office hours, not at nights or weekends.
It does about 2 weeks for the IRS system to get updated with your new EIN. So you have to wait these 2 weeks to make a tax filing. However, most other things, such as opening a bank account, etc can be done rightaway.
Online EIN Application
Let’s get started with the online application:
We do a quick Google search for “get EIN”.
The IRS webpage shows up within the first few results.
Here’s how the page looks:
The page explains who is eligible to apply for an EIN and what the process entails.
When you hit “Apply Online Now”, it takes you to the next page, where the WIN Assistant first gives you an overview of the process.
Also, here is the FAQs page for online EIN, if you want to look at it.
They also warn you that you need to complete the process in one go and that you get your EIN immediately.
Now you can go ahead and hit “Begin Application” at the bottom of the page.
It flashes a warning as you begin the application not to use the system for any fraudulent purpose. Point taken.
The application starts off with your business structure- Sole Proprietorship, LLC, Partnership, etc.
If you pick Sole Proprietorship…
… it goes on and asks if you are a regular sole proprietor or a household employer. For self-employed physicians or independent contractors, pick option 1.
My business structure is an LLC, so I will go ahead pick that instead.
It confirms with you that did, in fact, want to pick LLC by going over what an LLC is and isn’t.
It asks how many members are in the LLC and where it was formed.
It reiterates that I am a single member LLC and therefore a disregarded entity for tax filing purposes. My business taxes flow through to my personal taxes on Form 1040.
Then it asks why I am applying for an EIN. I started a new business and this was my reason to get an EIN.
Then it requests information about the Responsible Party. This needs to be an individual, not another entity. You, as owner, can be the Responsible Party. Or you may have a third party applying for you.
You need to provide your name and Social Security Number.
Next comes the business address and phone number.
It then asks for some more details of the LLC:
- Legal name of LLC
- DBA (Doing Business As)/Trade Name of the LLC
- County and State where the LLC is registered
- Where Articles of Organization will be filed
- Start date of the LLC
Some more questions follow, which are usually a no for physician practices or side gigs.
Last, but not least, it asks for the description of what your business does. Healthcare- if you’re setting up your practice LLC.
It then asks if you can obtain the confirmation letter online- by printing it out. Or if you’d like to receive it by snail mail.
The online option is easy and instantaneous.
You need this letter forever, so keep it somewhere safe.
It gives you an opportunity to review all the information you have entered and correct any errors before final submission.
Once you hit submit, it confirms that you have been assigned an EIN.
It recommends you save this final page for your records, apart from the confirmation letter which actually contains your EIN.
You will not receive any other email or snail mail with your designated EIN.
If you forget your EIN or misplace this letter, you have to call the IRS and have them locate your EIN from their records. Save yourself this hassle.
A popup window opens up where it says “CLICK HERE for Your EIN Confirmation Letter”. Print it and download it.
Once you have saved or printed your letter, you hit “Continue” and that’s it. You’re all done.
Congratulations on taking another step forward in your business.
I hope this was helpful for those starting out in their businesses- either setting up a solo practice or for a side hustle. Please let me know if you have questions or comments!
One Response