Starting a business is a challenge. Of course there’s a lot of excitement to it, but there are even more challenges and decisions to make.
Among all of these choices, getting an EIN stands out as one that you absolutely must do. This number is your business’s social security number, and it’s needed for everything from opening bank accounts and hiring employees to filing taxes.
In this article, we’re going to walk you through why an EIN is important and how you can get yours today!
An EIN might just be a bunch of numbers on paper but it’s the backbone of your business — no matter how big or small it may be. Here’s why every entrepreneur should be itching to obtain one:
Your business has a name, but names aren’t enough when it comes to handling administrative tasks. You need a unique identifier that banks, government agencies, vendors, clients — everyone — can use to validate your business's credibility so that you can start doing transactions with them. Plus, some deals just require it. So without an EIN, they won’t happen.
If your goal is to grow and scale with the help of employees then having an EIN will be mandatory for you sooner than later anyway. But besides meeting federal requirements for payroll taxes and benefits, giving each employee their unique identifier (an EIN) makes things so much easier when it comes time for tax season.
Regardless of whether you’re operating as a sole proprietorship or LLC, all businesses will eventually have to file taxes in some capacity or another. Having an EIN gives the IRS way more visibility into what exactly you’re doing than any other ID would provide them which helps reduce the chance of penalties down the line.
Getting yourself an Employment Identification Number, or EIN shows your business off as legit and operating legally, which can help put people’s minds at ease. Clients, partners, and investors alike will be more confident in working with or investing in your business venture knowing you’re doing things the right way.
An EIN is also usually required when applying for official business licenses and permits. Having one will validate your business and make it clear that you’re all about playing by the rules. While this is a legal requirement no matter how you slice it, there are some strategic benefits to obtaining one as well.
Businesses that aren’t registered or operate informally won’t have an EIN and won’t have the professional image yours does. This difference alone can give stakeholders confidence in what you bring to the table and could be what sets your business apart from its competition.
Figuring out some of life’s biggest questions might feel like trying to solve a puzzle without enough pieces sometimes. But getting your hands on an Employer Identification Number (EIN) shouldn’t be one of them! Let us walk you through the application process step by step:
Not everyone needs an EIN just because they started a business in America or its territories. Generally speaking though, if you want to hire employees or open up a bank account then yeah—you probably do need one! Sole proprietorships, partnerships, corporations and LLCs are all entities that usually require an EIN as well.
There are some exceptions though: sole proprietorships without employees may not need one themselves directly even if their entity does overall. With eligibility guidelines like this being so broad yet specific at the same time it’s best to check with IRS guidelines or consult with a legal/tax pro before getting too deep into things here. That way there isn’t any confusion down the line which could delay or even prevent you from getting your EIN.
Applying for an EIN with the IRS might sound daunting, but it’s not as bad as it used to be! There are quite a few ways to do it now, including online, by mail, fax or phone. The fastest and easiest way is through their website. You can also fill out and submit form SS-4 if you prefer paper applications. But remember that choosing this paper method will significantly increase your processing time.
If you want to go the phone route then give them a call—just know that this isn’t available 24/7 like their other methods are. One thing to consider before filling it all out: what are your time constraints and how accessible is each application method for you? Regardless of which one you pick, ensure accuracy and completeness across the board so no additional delays occur.
Regardless of the method chosen here, there’ll be some info about your business that you’ll need to provide: legal name, structure, address and purpose just to name a few! You’ll also have to supply an SSN or ITIN when prompted.
To make sure everything goes smoothly on your end before submitting anything I’d suggest double-checking all your information first for any errors or omissions—they’re super easy to miss sometimes! Lastly, make sure you review whatever guidelines/instructions correspond with the application method you chose so that compliance concerns don’t hold things up either.
Finish up the application, and get it over to the IRS. After sending it in, you'll get the EIN immediately if you applied online and everything is all good. For other methods, processing times will vary. When submitting by mail or fax, be extra sure that everything is included and filled out correctly so there are no delays.
Same for applying by phone: have what you need ready so the process goes as fast as possible. Write down any confirmation or reference numbers they give you for future use. Once your EIN has been acquired, breathe easy knowing your business is officially recognized by the IRS.
Here are some tips to help make applying for an EIN go smoothly so you can get approved quickly:
- Accurate Information: Make sure all info provided on your app is correct and up-to-date. Mistakes or discrepancies could slow things down.
- Understand Your Business Structure: Different business structures have different requirements for getting an EIN — sole proprietorships, partnerships, corporations, LLCs — do a little research to find out what’s required of yours before applying.
- Keep Records: Once you have your EIN safe and sound, keep a record of it so you won’t lose it like I always do (just in case). It’ll be needed later on during various tax-related activities and business transactions.
- Stay Informed: Tax laws change from time to time — which can affect your business’s tax obligations and its EIN too. So stay updated with that kind of stuff just in case something happens down the line.
Getting an Employer Identification Number (EIN) is often one of the first moves new owners make when starting a business — because without one lots of important tasks can't be done otherwise, like opening bank accounts or filing tax returns! So knowing how important they are already puts small businesses ahead of those who don't. But if you follow the steps in this guide, and keep these tips in mind, you'll be golden.