You are probably thinking about opening a business in the United States and seeking the best guidance on every process, requirement, investment, etc.
During all your research, you have encountered the term EIN quite a few times.
So now you are here to precisely understand what this means and why you need it to kickstart your business.
Let’s start by defining this concept.
What is an EIN (Employer Identification Number)?
An EIN is, in fact, short for “Employer Identification Number.” It’s a unique identification number assigned to a business entity to allow the Internal Revenue Service (IRS) to easily identify it.
The EIN acts as a sort of tax identification number for your business, consisting of nine digits and including information about the state where the business was registered.
When applying for an EIN, there is a Responsible Party responsible for the process. In the process, this Responsible Party must provide their personal information such as name, social security number (if available), taxpayer identification number, or personal taxpayer identification number.
What Types of Businesses Need an EIN?
As mentioned earlier, the EIN is a number assigned by the IRS to easily identify a business entity (an LLC, C Corp, S Corp, etc.).
So businesses with employees, those subject to certain types of taxes, or those registered as a corporation need an Employer Identification Number.
Here are additional reasons why a business might need an EIN:
- To file taxes.
- To open bank accounts.
- To apply for licenses and permits.
- If they withhold taxes on non-salary income paid to a non-resident alien.
Differences between EIN, ITIN, and SSN
With an EIN, you can open a business bank account, record payment methods, and register the company with clients and suppliers.
On the other hand, the ITIN stands for Individual Taxpayer Identification Number, and it’s an identification number granted to you as a natural person and non-resident alien. The ITIN doesn’t provide any work benefits or permits, but it’s useful for personal matters such as your personal bank account, filing your tax returns, and more.
Lastly, we have the SSN, which is the Social Security Number that helps you maintain accurate records of your salary or self-employment income. This number is only available to U.S. citizens and residents.
Now that you know the differences, I’ll show you the steps to correctly apply for an EIN.
Steps to Apply for an EIN
1. Apply for it for free
There are 4 ways to do it.
- The first is online by going to IRS.gov through the EIN Assistant.
- Then, the second way is by downloading the SS-4 form and sending it to the IRS by mail or fax.
- The third way is by calling the IRS helpline, where they provide you with all the instructions and steps to follow.
- The last option is through private companies that specialize in helping businesses apply for an EIN for a fee.
2. Have your information ready
Have all your business information ready before starting to fill out the form. You’ll need information about your business’s legal structure, the responsible party, the address, the reason for requesting an EIN, etc.
3. Fill out the form
As mentioned earlier, you can download it to send by mail or fill it out online.
This form is available on the IRS website, and you should complete it as soon as you open it because if you remain inactive for more than 15 minutes, your session will be closed. That’s why I asked you to have all the information ready.
4. Verify your EIN
The EIN of a business cannot be shared with just anyone. The sole proprietor, authorized person, or partner should contact the IRS Specialty Tax and Business Line to verify the EIN.
Need Help Establishing Your Business in the United States?
Don’t worry; we are Rex Legal, and we want to assist and advise you in your process of creating your business in the USA.
Contact us and start achieving your business goals.
