For any business, paperwork is inevitable.
And to almost any business owner, this means there are tens if not hundreds of different forms and paperwork you must fill out in order to be in “good standing” with the government, the IRS, and more.
One such form deals with the Employer Identification Number (EIN).
What is the EIN?
Also known as the “tax id number”, you can think of the EIN as a social security number for your business.
Look at it this way: people need a Social Security Number. Why? Because is probably the most definitive form of ID you have, and you can’t do anything without it. You need it to open a bank account, apply for credit cards, get a marriage license, etc.
The point is; you need that 9-digit number for virtually everything.
Here’s one quick example: it’s simply too hard for the IRS to keep track of the myriad of business names when it comes to payroll taxes and such (how many “Tony’s Pizza” do you think there are?)
Another example is buying goods in many cases / states, you will not have to pay sales tax if you are buying items for resale. The proof you need? You guessed it, your EIN.
When forming a new business, an Employer Identification Number must be applied for.
If you either:
- Have employees
- Operate as a Corporation or a Partnership
File one or more of the following tax returns:
- Alcohol, Tobacco, and Firearms
- Withhold taxes on income paid to a non-resident alien
- Have a Keogh plan
Or involved with any of the following types of organizations:
- Trusts and estates
- Real-estate mortgage investment
- Farmers Cooperatives
- Plan administrators
then you will need an EIN.
To get an EIN, you will need to fill out the IRS form SS4.
There are also circumstances in which you will have to apply for a new number. Your EIN must be changed if:
- Your existing business is purchased by another individual, creating a sole-proprietorship.
- A sole proprietorship, partnership, corporation, or LLC changes from one to another.
- The owner of a company passes away, and the estate takes over the business.