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How to File for an EIN to Start Your Own Business

You’ll need to know how to do this

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Thinking about starting a business in the United States?

 

Well, you’ll most likely need an EIN, or employer identification number. The unique nine-digit number is used to identify American businesses by the IRS for tax filing purposes and to be able to pay employees. The number never expires and can never be reissued to another business, making it pretty similar to the concept of a Social Security number.

 

We understand that this information might be new and confusing, so we’ve laid out everything you need to know about EINs and how to properly file for one.

Do You Need One?

The IRS has made it simple for business owners to determine whether their company needs an EIN. 

Basically, if you answer yes to any of the following six questions, you should file:

 

  1. Do you have employees?
  2. Do you operate your business as a corporation or a partnership? 
  3. Do you file any of these tax returns: Employment, Excise, or Alcohol, Tobacco and Firearms?
  4. Do you withhold taxes on income, other than wages, paid to a non-resident alien?
  5. Do you have a Keogh plan? (According to the IRS, a Keogh plan is a tax-deferred pension plan available to self-employed individuals or unincorporated businesses for retirement purposes. A Keogh plan can be set up as either a defined-benefit or defined-contribution plan, although most plans are set as defined contribution.
  6. Are you involved with any of the following types of organizations?
    • Trusts, except certain grantor-owned revocable trusts, IRAs, exempt organization
    • Business Income Tax Returns
    • Estates
    • Real estate mortgage investment conduits
    • Nonprofit organizations
    • Farmers' cooperatives
    • Plan administrators

 

If you answered yes to any of these questions, then you need an EIN number in order to legally run your business and ensure that taxes can be collected on your business. You'll also need an EIN if you want to open a bank account for your company.

Other Reasons You Might Need an EIN

EINs are not just for filing taxes but also for opening a bank account with your business name on it, applying for a business credit card, applying for business permits and licenses and also applying for business loans. Additionally, the only time you’ll need to apply for a new EIN is if the ownership or structure of the business changes.

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@nina_p_v via Twenty20

How to Apply

Now that you’ve determined that you do indeed need an EIN, it’s time to apply. It’s recommended to apply as soon as you launch your business, as most banks and credit unions will not allow a business to open a business account until an EIN has been assigned. Applying is free through the IRS website and business owners should refrain from filing elsewhere, especially websites that claim a fee for the application.

 

Additionally, there are four ways to apply for an EIN through the IRS: online, by mail, by fax and by phone. The average turnaround time varies per form of application and will help business owners better decide which route they wish to take for filing. Online applications issue EINs immediately after the application is completed and information is validated during the session. Mailed applications take four weeks to process. Faxed applications take up to four business to process, and phone applications for international applicants can vary.

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