As a new business owner, applying for your tax and employer identification number is probably one of the easier tasks you will undertake at the start of your endeavor.
The three general types of taxpayer ID numbers are:
- Social Security number (SSN). A social security number is the most common identifier for personal identification and tax purposes.
- Employer ID number (EIN) An Employer ID (or EIN, for short) is a federal tax identification number for businesses. Although it's labeled as an identifier for "employers," you don't have to have employees to need an EIN.
- Individual Taxpayer ID number (ITIN) for people who aren't eligible for either of two other general taxpayer ID numbers above.
What type of Taxpayer ID does a Sole Proprietorship, an LLC, Partnership, or Corporation Use?
- A sole proprietorship typically uses the owner's Social Security number for the tax number for the business. Since this type of business files and pays taxes through the owner's personal tax return, the SSN is the only Taxpayer ID Number you need.
- Businesses that are registered with the IRS typically use an Employer ID number for business identity. An Employer ID number (EIN) is used by all other types of businesses, even if the business has no employees. Banks often require a new business to have an EIN before they can open a business bank account. You can apply for an EIN online at the IRS website.
- The single-member LLC business type is an exception. If you are the sole owner of an LLC, you should use your Social Security Number, not the tax ID number (EIN) of the business.
Talk to a Small Business Lawyer
All business entities must get an employer identification number. Without an EIN, your business will not be able to open bank accounts or file taxes. The employer identification number is similar to a social security number or national identification number. In short, the EIN is used to formally identify your business with the federal government.
All types of businesses can apply for and be issued EINs, entities such as limited liability companies (LLCs), sole proprietorships, non-profit organizations, government agencies, S corporations, partnerships, estates and trusts, etc. Moreover, the IRS has no preferences regarding the size of the companies when issuing EINs, a company with only one employee is as eligible for an EIN as a multinational corporation.
The main way to get an employer identification number for your business is online. A new business entity may apply for an EIN on the IRS web site. After filling out the application and after all validations are completed you will get your EIN immediately. You can then download, save, and print your EIN confirmation notice. The online application is the quickest and easiest way to get an EIN. The EIN application asks you to supply basic information, such as the name and address of your business, the business entity type, the business category, your name and the Social Security, and the state of organization. You could also apply for an EIN by phone, online, fax, or by mail.
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A good business attorney is like a partner to your business and can guide you through some of the most confusing, challenging, and mind-numbingly mundane times for your new business. The main reason to hire a business attorney now is to save yourself money and time as your business grows. The savviest business owners are proactive about obtaining legal assistance at the start of their business journey.