In the world of business, acronyms reign supreme. Depending on your field or department, your daily acronym vocabulary might vary. In the world of incorporating, where we help build businesses every day, some of the more common combinations we come across include LLCs (limited liability company) SBA (Small Business Administration), and RFP (request for proposal). Yet, here’s one lesser known but highly important acronym that is crucial to the success of your business especially if you’re an entrepreneur: The EIN.
What’s an EIN?
EIN stands for Employer Identification Number, also know as a Federal Tax Identification Number. It’s kind of like a Social Security Number for a business -- it’s how the IRS identifies your company. The EIN is a nine-digit number assigned to you and helps you (legally) conduct business activities.
Do I Need an EIN?
According to the IRS, your business must have EIN if you have any of the following:
- Your business operates as a corporation or a partnership
- You file the following tax returns: Employment, Excise, or Alcohol, Tobacco and Firearms
- You withhold taxes on income, other than wages, paid to a non-resident alien
- You have Keogh plan
- Trusts, except certain grantor-owned revocable trusts, IRAs, Exempt Organization Business Income Tax Returns
- Real estate mortgage investment conduits
- Non-profit organizations
- Farmers' cooperatives
- Plan administrators
How Do I Get an EIN?
There are many ways you can obtain an EIN. The IRS outlines the various options:
- On-line, by using the on-line EIN application
- Over the phone through the IRS's toll-free telephone number, (800) 829-4933
- Via fax by dialing the fax number at the location accepting applications from your state. The instructions on the Form SS-4 indicate which location will accept your faxed request.
- Through the mail by completing Form SS-4 . The instructions for the form provide the correct address.
Third parties can receive an EIN on a client's behalf by completing the new "Third Party Designee" section and obtaining the client's signature on Form SS-4. This avoids having to file a Form 2848 (Power of Attorney) or Form 8821 (Tax Information Authorization) to get an EIN for their client.
The IRS does advise not to apply for EIN until your organization is legally formed. According to their website, nearly all organizations are subject to automatic revocation of their tax-exempt status if they fail to file a required return or notice for three consecutive years. When you apply for an EIN, we presume you’re legally formed and the clock starts running on this three-year period.
If you’re interested in applying for your EIN, but still need to legally form your business, you can contact one of our licensed incorporating agents by phone or email here. We can also obtain an EIN number for you!