If you’re getting a new business off the ground — or getting ready to expand by bringing on your first employee — the number of details you need to pay attention to can feel overwhelming. It’s an exciting moment because you’re figuring out how to reach some lofty goals. At the same time, you’re taking on unfamiliar tasks, like getting an EIN, that probably don’t feel like they have much to do with bringing your dream to life.
But fear not!
This particular hurdle is not very high — and it’s definitely something you can handle yourself. Read on to get the ABCs of EINs: Learn what they are, see whether you need one, and find out how simple it is to register for one.
Are you just looking for the IRS EIN page?
If you already know what you need, we don’t want to get in your way. Go straight to the IRS site to sign up for your EIN. It’s free and easy.
If you still have questions, read on!
What’s an EIN in the first place?
EIN is short for employer identification number. It’s the unique nine-digit number the IRS uses to identify your business. Think of it as your company’s social security number: You’ll use it to report all your income and employment taxes.
In your quest to get an EIN, you may also come across terms like FTIN (federal tax identification number), but don’t let them confuse you. SSN and EINs are the federal tax id numbers for individuals and business entities, respectively. Sorry there are so many IRS acronyms to contend with!
Who needs an EIN?
You’re required to have an EIN if any of the following are true:
- Your business has employees other than you.
- Your business is a corporation (like a C corporation or a S corporation) or partnership (both general and limited partnerships). Even a single-member LLC is required to obtain an EIN if it’s going to hire employees.
- Your business offers a Keogh pension plan.
- Your business withholds taxes on income, other than wages, paid to a non-resident alien.
- Your business is involved with the administration of any of the following: Trusts (except certain grantor-owned revocable trusts, IRAs, and exempt organization businesses), income tax returns, estates, real estate mortgage investment conduits, non-profit organizations, farmers’ cooperatives, or plan administrators.
The only kind of business that isn’t required to have one is one that’s structured as a sole proprietorship with no employees. Typically, sole proprietors are people like independent consultants and freelancers, but they could include a wide range of one-man shows.
But even some sole proprietors get EINs in order to keep their personal social security numbers private (especially when they work with many different clients). Doing so will help reduce your risk of becoming a victim of identity theft, and can help separate business from personal stuff down the road.
Check out our article on business structures to learn a little more about the ways you can organize things.
Having an EIN also helps make other things on your to-do list much easier. Want to open a bank account in the name of your business? Are you issuing 1099 forms to independent contractors you use? Do you want a credit card in the name of your business or do you need a business permit? Then you’ll probably need an EIN.
If you’re at all unsure about whether you need an EIN, your accountant can probably give you the yay or nay in about two seconds flat.
How to register for an EIN
The first thing to know: It’s absolutely free and very easy to get an employer ID number. Don’t bother with those online services that charge for them. Here are the three quick ways to do it yourself:
Apply online. This is how most people are going to get their EIN. Here’s how it works:
- If you’re not 100% sure you need an EIN, go to the IRS website’s page called Do You Need an EIN? If you click on the YES option for any one of the questions, you’ll then be taken through an EIN sign up flow.
- Or go straight to the sign up page. The user experience isn’t great — you’ll have to close a few pop ups before you’re allowed to start — but this is the right place.
- Just answer a few questions and get your EIN instantly.
- There’s no fourth step. It’s really that easy!
Apply by mail or fax. You can do this if you really want to, but it makes the process a whole lot longer than it needs to be. If snail mail is the route you want to go, download the IRS Form SS-4: Application for Employer Identification Number. Fill it out and either fax or mail it in to get your EIN within four weeks.
Apply by phone. This is much faster than mail. You just dial the IRS Business and Specialty Tax Line at 800-829-4933, answer a few questions, and you get your EIN right then and there (but you won’t receive your official EIN confirmation notice until later).
And that’s it. Yes, the wave of details you need to handle when starting your own business can feel like a tsunami, but this is one task that’s pretty easy to cross off your list. The EIN just takes a few minutes, as do some of the other essential steps. Good luck getting through the grunt work, and back to building your dreams.