How To Apply for an EIN

A small business owner will likely have to apply for an employer ID number (also known as a tax ID number) during the start-up business process. EINs are useful for opening a bank account for your business, applying for credit cards for business, or applying for a loan.

Thursday, September 30th 2021
How To Apply for an EIN

Before an individual can apply for an EIN, they must first understand its meaning and why it is necessary. An Employer Identification Number or EIN is a unique 9-digit number. 

The IRS uses EINs to identify business entities and tax purposes. Another name for the EIN is Federal Tax Identification Number or FEIN. 

What is an EIN?

EINs are not required for all businesses. EINs are required for businesses with employees who operate as a corporation, partnership, or Limited Liability Company (LLC). These entities are taxed the same as corporations. You may not need one if you are a sole proprietorship or a single-member LLC without employees. The owner's Social Security Number is used to identify the business.

Determine your eligibility to an EIN

Three steps to get an employer identification number

You should apply for an EIN as soon as your business is launched. However, it's a good idea to do so in advance of tax season, or when you need to submit a loan application. You can apply for an EIN through the IRS at no cost. However, companies that charge to do so should be avoided.

These are the steps to applying for an employer identification number.

  1. Determine your eligibility to an EIN

To apply for an employer identification number, there are two requirements.

    • Your principal business must be located within the United States or U.S. territories.
    • A valid taxpayer identification number (such as a Social Security number) must be provided by the person applying.

The first step in determining your principal business is to identify the primary income-generating activity you do (e.g. consultant, engineer, doctor) and your physical location. You don't have to provide services in the U.S. to be eligible. You can apply for an EIN as long as your principal business activities are located in the U.S.

The applicant does not have to be the owner of the business. The applicant may be a partner, officer or director of the company. The IRS allows any responsible person to apply. This is defined as anyone who oversees the company's finances. A responsible party must sign Form SS-4, and complete the third-party designee section.

Gather all the information you need

  1. Gather all the information you need

Start by reading the PDF version Form SS-4: Application to Employer Identification Number. This will allow you to ensure you have all required information, including names, addresses, and the Social Security Number of the responsible party.

It is important to identify the type of business entity you have. If your company is a corporation, then you will need to indicate the country or state where your business was incorporated. Make sure to know how many members you have in a multi-member LLC.

You will also need the following information to complete your application:

 

    • The primary reason you apply (e.g., to launch a business, for banking purposes, to hire employees, etc. You can.
    • When was your business founded or acquired?
    • Include a description of the primary industry and your primary product/service.
    • The highest number and type you anticipate hiring in the next 12 months.
    • Your business paid the first date wages.
    • Closing month in your accounting or fiscal calendar (usually December if you're a calendar-year taxpayer).
    • If you pay $4,000 in wages per calendar year, you can file an annual employer tax return instead. This section of the application should be discussed with your accountant.
    • You can ensure that you have all of the necessary information before you start the online application process by reviewing and filling in Form SS-4.

Apply online for an EIN

  1. Apply online for an EIN or send a fax to get one

There are several options available to apply for an EIN from the IRS. Online, fax, or mail are all options for applying for an EIN. Foreign applicants who wish to immigrate to America for business reasons can apply via phone. Online applications are the fastest and easiest way to apply for U.S.-based applicants.

Information you will need to apply for an EIN

    • Address for business
    • Name of principal officer, manager, or owner
    • The number of members in an LLC
    • Type of business, primary activity
    • Date that the business was founded or acquired
    • Closing month in the entity's accounting years
    • Expected number of employees to be hired
    • Contact information

The IRS' online EIN assistant provides an easy-to-follow process for the online application. You can apply online from Monday to Friday, 7 a.m.-10 p.m. EST.

The assistant will guide you through the application process, and provide links to other resources and information. For security reasons, you will be automatically logged out after 15 minutes. Each responsible party can only apply for one EIN per day.

You will instantly receive your EIN if you submit your online application to the IRS. Fax applications can take up to four business days for processing. For mailed applications, it takes four weeks.

If you want to apply for an EIN by fax or post, you will need to complete the Form SS-4.

An Employer Identification Number is necessary for several reasons:

  • To open a business bank account
  • File tax returns
  • Hire employees
  • Track payroll taxes. 
  • Applying for licenses
  • Filing for permits

Applying for an Employer Identification Number

With a better understanding of what an EIN is for, owners can start the application process.

Individuals applying for an EIN must have a valid Taxpayer Identification Number (TIN). To be eligible, owners will need to provide a Social Security Number (SSN). Individuals can also use their Individual Taxpayer Identification Number (ITIN). Otherwise, they cannot apply.

Having a Taxpayer Identification Number or SSN is not the only item owners need for EIN eligibility. The geography of the business also plays a role in the application process. The location of the business structure must be in the United States or U.S. Territories. 

Lastly, a daily limitation exists when applying for an EIN. Each responsible party can only apply for one EIN per day.

What is a Responsible Party?

The person who owns or controls the business entity is called the “responsible party.” This applicant can only be either a government entity or individual (or natural person), not an entity.

Do All Businesses Need an EIN?

Only businesses that operate as a corporation, Limited Liability Company (LLC), or partnership with employees need an EIN. Business entities taxed as a corporation need to get one, but not all businesses need to apply for an Employer Identification Number (EIN). Thus, if the company is a sole proprietorship or single-member LLC and has no employees, an EIN is unnecessary. To identify these business entities, the IRS uses the owner’s Social Security Number (SSN).

What is the EIN Application Process

To avoid any inconvenience, individuals can apply online. When owners file for an Employer Identification Number (EIN), beware of websites that charge for it. The Internal Revenue Service (IRS) offers it as a free service, and there should not be any fees to get an EIN. Entrepreneurs can apply for an EIN through the IRS website. The application process is often quick, and the applicant will receive the EIN within seconds after filing.

If the individual applying for an EIN with an SS-4 form does not have online access, they can apply via mail or fax number. Yet, sending the completed form SS-4 using these options may take longer. Online and over the phone are often faster alternatives. Yet, the number to call is not a toll-free number. Hours of operation are Monday to Friday, 7 a.m. to 10 p.m. Eastern Standard Time (EST).

Whether an owner is applying for an EIN by mail, fax, phone, or electronically, all applicants must disclose specific information.

Information necessary to apply for an EIN:

  • Business legal name
  • Applicant’s legal name

  • Trade name (if applicable)

  • Business mailing address. Include the street address, U.S. state, and country of the business location.

  • Name of the principal officer, general partner, grantor, owner, or trustor. The IRS refers to this individual as the “responsible party.”

  • The Tax ID Number of the “responsible party.” (i.e., SSN, ITIN, or EIN) This individual controls the applicant entity and the disposition of its funds and assets.

If the business entity already has an EIN and the owner wants to find out if it is still valid, contact the IRS. Owners looking to verify their business EIN can check it directly with the IRS. The process is simple and starts by visiting the Exempt Organization page of the Internal Revenue Service (IRS) website. The site not only verifies EINs but advises you if the organization is in good standing with the IRS.

Filing for Tax-Exempt Status?

If filing for tax-exempt status, owners must ensure that the business is legal before applying for an EIN. A tax-exempt status revocation can happen if they fail to file a return for three consecutive years. (Note: the tax-exempt organization should have only one EIN.)

Tax-exempt organizations, like health, charitable, scientific, or literary, usually need to have and use an Employer Identification Number (EIN). Although these organizations are tax-exempt, owners still need to use their EIN. The use of the EIN is for filing employment tax returns or giving tax statements to employees.

When does a Business Need to apply for a New EIN?

A business needs to get a new Employer Identification Number (EIN) when there is a change in ownership or structure. Yet, changing the name of the company does not require getting a new EIN.

If a Corporation files papers with the state to convert to a Limited Liability Company, it requires a new EIN. The corporation will operate as if it is liquidated and will use the default classification of partnership.

If owners of a Limited Liability Company or a Partnership are considering using an older EIN, it is possible, but only under certain conditions. The best thing to do is contact the IRS. Owners can learn more information about using a previous Employer Identification Number.

Take note, Employer Identification Numbers do not expire, and the reissuing of EINs does not occur.

How Many EINs is a Business Allowed?

The number of Employer Identification Numbers an owner can have depends on their number of businesses. If only one business entity exists, the owner can have only one EIN.

Conclusion

Whether a business owner’s legal residence is in Cincinnati, Chicago, or California, it does not matter. To avoid any trouble from Internal Revenue Service (IRS), the owner needs to ensure their business is legal and has the proper paperwork. As long as they have a business entity in the United States or U.S. territories with employees, they must have an EIN.

Do I ever have to update my EIN?

These are the most common circumstances in which you will need to apply for an EIN. - You have changed your business structure. If you are a sole proprietor or plan to incorporate your business, you will need a new EIN. - A bankruptcy proceeding may be filed against you. - You buy an existing business or inherit a business you can operate as a sole proprietorship. You don't usually need to reapply for an Employer Identification Number if you are changing the name or opening a new business location.

What happens if my EIN is lost?

You an apply for a new EIN if you misplace or lose your EIN. There are many ways to check your tax ID for your business. - Locate the computer-generated notice that you received when applying for an EIN. - Contact your bank if you have an EIN and opened a bank account. - Locate your EIN in a tax return you have previously filed. - Your EIN is required by many business service providers when you sign up to services such as merchant service providers, insurance companies, and tax professionals. To find out if they are able to provide it, you could contact one of these companies. - If you are unable to locate your identification number using other methods, contact the IRS Business & Specialty Tax Line during normal business hours.

What is the cost of an EIN?

Although there are many companies that charge for an EIN you can file with the Internal Revenue Service (IRS) for free. It is also very easy.

Do I need an EIN for every business?

Every business should have an EIN. However, sole proprietors can only have one EIN regardless of how many businesses they own.

Is an EIN required for an LLC?

Sometimes. If the LLC is a single-member entity, it will be registered as a disregarded entity. An EIN is required for LLCs that are set up to be taxed like a corporation or partnership.