An employment ID number, often referred to as an Employer Identification Number (EIN), is a crucial identifier for businesses in the United States. Think of it as a social security number but for your business. This unique nine-digit number is issued by the IRS and serves multiple purposes, primarily related to federal tax reporting.
Every business that has employees must obtain an EIN. It’s not just limited to large corporations; even sole proprietorships need one when filing employment tax returns. If you’re starting or running a business, having this identification can significantly streamline various processes—from hiring employees to applying for loans or opening bank accounts.
But why exactly do you need an EIN? For starters, it helps separate your personal finances from those of your business—a vital step in building a solid credit profile and protecting yourself from legal liabilities. Additionally, if you're looking into retirement plans like Keogh or solo 401(k)s, you'll also require this number.
Applying for an EIN is straightforward and free through the IRS website. Before you apply, ensure that you've registered your new entity with your state—this could be anything from forming a corporation to establishing a partnership or LLC. Once you fill out Form SS-4 online on the IRS site, you'll typically receive your EIN immediately.
What information will you need? Be prepared with details such as:
- Your name and those of any other owners,
- Social Security numbers (or another type of taxpayer identification),
- The name and mailing address of the business,
- Type of entity (LLC, corporation etc.),
- Reason for applying,
- Date when the business was started or acquired, and more.
Once obtained, keep track of this important number—it appears on various documents like tax returns and applications for bank accounts.
While there are no strict rules about when exactly to get an EIN after forming your entity, it's wise to secure one promptly after formation—or whenever significant changes occur within your organization requiring its issuance.