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You’re excited about launching a new business, and there’s so much to do! One of the most important steps involves figuring out whether your business will need it’s own tax ID number – called an EIN, or employer identification number.
A lot of women taking their first dives into entrepreneurship come to me with this question. The answer is almost always yes. Sometimes, though, your business won’t need one… at least not at first.
So here we’ll talk about whether you do need to grab an EIN for your business and exactly how to do that for free.
What Exactly Is an EIN?
An EIN is basically like a Social Security number for your company. And don’t let the “employer” ID fool you. Most businesses need an EIN even if there are no employees.
Sometimes you’ll see it called an FEIN – the F is for federal.
The EIN gives your business a separate identity that the government will use for all sorts of purposes, including:
- Payroll and payroll taxes
- Federal tax returns
- Business licenses and registration forms
- Annual reports
- Opening bank accounts
- Setting up retirement plans
You can see that this number serves a lot of different purposes. And it’s one of the first things you’ll need to get your business up and running.
Who Doesn’t Need an EIN?
Like I said earlier, most businesses do need EINs. That includes:
- S corporations
- C corporations
- B corporations
The exception: a sole proprietorship with no employees and no business retirement plan. If this describes your business set up, the IRS sees no difference between you and your business. That means you can use your own Social Security number as your company’s ID number.
BUT if you plan to set up a retirement plan – and I hope you do – it makes sense to get an EIN for your sole proprietorship ASAP.
Pro Tip: If your business is an LLC or a corporation, you need to form the company legally before you apply for its EIN. For sole proprietorships and partnerships, you can apply right away.
How to Get Your EIN Online
Applying for your company’s EIN is super simple, quick, and free.
You’ll find lots of service providers happy to charge you a fee to handle this for you – and some of them make it sound like a huge chore. It’s not. So while you can hand this off, it’s easier and cheaper to DIY.
In fact, it only takes about 15 minutes to apply online. And you’ll have your EIN right away.
Dealing with the IRS can make anyone feel anxious. But this is one area where the experience is quick, easy, free, and stress-free.
Here’s what you’ll do:
- Gather all of the info you’ll need, because you have to finish your application in a single session. Here’s what you’ll need to know or have handy:
- your business structure: sole proprietor, LLC, partnership or corporation
- the total number of business owners
- the state where your business was formed
- the reason you need an EIN, such as:
- forming a new business
- an existing business will be hiring employees
- to open bank or credit card accounts
- the date the business was created
- the main business activity
- name, contact information, and Social Security number (or other tax ID number) for the “responsible party,” usually meaning you
- Go to the IRS Online Small Business Center
- Click on the “Apply Now” button.
- Fill in the information and submit your application.
- Get your business’s new EIN instantly.
If you don’t want to – or for some reason can’t – apply online, you can fill out Form SS-4 and either fax or mail it to the IRS office where you file your taxes. It normally takes about 4 to 10 business days to get your EIN if you file by fax or mail.
Once you have your EIN, you are officially in business! You can open your business bank account, set up your own retirement plan, hire employees… everything you need to do to get up and running.
Your next step: Setting you your business bookkeeping the right way, right away so you don’t miss a single transaction. Tracking the money flowing in and out of your business isn’t just for tax purposes. Up-to-date bookkeeping can help you
- make informed business decisions
- maximize profits
- analyze business spending
- make sure customers pay on time
- and so much more!
Not sure how to set up your bookkeeping? Or just want someone to manage it for you? Contact me today for a free consult… and together we can take your business wherever you want it to go.