EIN Basics
EIN is a US Tax ID number which is mandatory, whether or not you own a business where you need to hire employees. It is a responsibility to get an EIN which must be fulfilled. Even if you have an established business, a start-up firm, or you are just planning to have a business.
Employer Identification Number, or EIN, is a tax identification number issued by the IRS in the US. It is very much similar to SSN, but it is specifically for business or professional purposes. So, all the more reasons to get an EIN if you want to keep your personal information separated from the professional.
Before getting started, let us briefly notify you about the information we will be getting:
- What is an EIN?
- Who needs it?
- Why does one need EIN?
- How can you apply for it?
What is an EIN?
Known as Employer Identification Number, EIN is a unique, 9-digit number issued by the IRS. It can be easily spotted as it comes in the format of xx-xxxxxxx. Anyone who is starting a business, into an estate administration, a partner in a firm, owns a trust, or so on requires an EIN.
It is important to remember that one entity needs one EIN. It is important when it comes to open bank accounts, apply for business licenses or file taxes. So, our experts suggest getting an EIN as soon as possible to avoid any complications.
Who needs an EIN?
All businesses that have employees or no employees such as partnership firms must apply for EIN. It is a tax identification number and thus, is required by all. To enlist the entities which need EIN:
- Any Corporation
- Partnership Firms
- Sole Proprietorship
- Estate Administrators (even if the owner is deceased)
- Trusts
- Personal or Private Service Corporations
- Tax-exempt Corporations
- Household Employers alongwith their agents
- REMICs (Real Estate Mortgage Investment Conduits)
- Employee Benefits Plans
While going through the list, you must have understood that almost everyone needs an EIN. However, if there’s still any confusion, check out the instructions of “Do I need EIN?” directly at the IRS website.
Why is EIN significant?
There are not one but many reasons which speak in favor of the need of EIN. Other than doing business, opening a business bank account, and so on there are various reasons. An EIN is also required to file tax returns as well as excise tax returns, but that is not all. Having an authentic and valid EIN is also required for the following reasons:
- To open a bank account and any types of business, estate or non-grantor trusts
- To get business grants and capital for work
- To hire employees
- To establish self-employed retirement plans under the federal tax treatment
- To track income tax generated through the business
- To file for bankruptcy
- To inherit an existing business
How to apply for EIN?
IRS has made it a lot easier for the individuals to apply for EIN with the introduction of EIN Assistant. However, to make it simpler for you we have listed down the required details for getting an EIN.
- Both the legal name as well as the trade name of the entity (if different)
- The name of the person in charge (partner, owner, trustee or the officer in authority)
- The email address for the legal entity and the person in charge
- The name of responsible party and their SSN, EIN, or other Tax Identification Number
- The type of entity (partnership, sole proprietorship, corporation, LLC, etc.)
- The number of LLC members (if applied)
- The state or foreign country where the company is incorporated (if requires an EIN for corporation)
- The reason to apply for EIN
- The accounting closing month you are following
- The expected number of employees within the next 12-month timeline
- The name, title, signature, and number of the applicant
- The details of the nominee (if there’s one)
In order to know more about the process of how to apply for EIN, check out the complete information, read the complete guide on EIN or FEIN for entrepreneurs.
Key Takeaways
In this article, we learned about the mandatory tax identification number, EIN. It is a compulsory measure that needs to be taken if you are planning to start a business in the US. Without it, the IRS can imply penalties on you and your business as well. Having an EIN can help you develop a brand image sooner.
So, what are you waiting for now? Write down your queries to us and let our experts guide you through. We have professionals who can assist you in the EIN application process without a hitch.
Written by – Priyanka Rampal
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