What is the goal of EIN? One sort of tax identification number is an EIN (TIN). Your EIN is generally used to identify your firm for tax purposes, similar to how a social security number is used. It is required to submit taxes, sign tax-related documents, hire staff, establish vendor accounts, register a business bank account, and prepare formal financial reports.

A nine-digit identifying number is an EIN. An EIN number resembles a Social Security number when written down. However, after the first two numbers, it is split only once (XX-XXXXXXX). On the other hand, a social security number is typically split between numbers three and five (XXX-XX-XXXX).

Not all businesses require an EIN. An EIN is one kind of TIN number, as we briefly mentioned, but there are other kinds of TIN numbers. TIN numbers can be of 5 different types:

• SSN: Social Security Number
• EIN: Employer Identification Number
• ITIN: Individual Taxpayer Identification Number
• ATIN: Taxpayer Identification Number – this number is for pending US adoptions
• PTIN: Preparer Taxpayer Identification Number – accountant who file on behalf of others

Not all of these EIN numbers are applicable to businesses, as you may have seen. The primary distinction between an EIN and an SSN, as well as who requires which number, is something that US-based firms with US citizen owners must comprehend.

Who then requires an EIN? A business often needs an EIN if they are hiring new employees, have a multi-ownership structure (like a corporation, partnership, or LLC), or are significantly changing their organizational structure.

You are only eligible to receive one EIN number for sole proprietorships. You must submit the appropriate papers to update or amend your EIN if the owner or legal information has to be changed.

There is no cap on the number of EINs that multi-member companies like corporations or LLCs can have. Depending on how your firm runs, you might need more than one EIN.

For instance, a big corporation just requires one EIN for the whole company. However, you can apply for a new EIN number for each of those divisions if you decide to silo off those businesses for tax purposes (as they are now separate tax entities). For several sites, you can also decide to take this route.

After you’ve established your company as a legal entity and obtained a chosen corporate legal name, you should obtain an EIN. Both of these details are required when you apply for an EIN number.

You must submit your application for an EIN number on the IRS website. You can get your EIN right away after filling out the free application.

EIN numbers can be applied for, processed, and distributed without cost.

An EIN can typically be obtained right away. However, the procedure could take a little bit longer if you are asking more complicated things, such an update to an EIN number or tax-exempt status.

Let’s move on to the process for requesting an EIN.

Either the SSA or the IRS (Internal Revenue Service) issues TINs (Social Security administration). (Source) The IRS is the only agency that issues EIN numbers.

Recap: You will need to formally form your business structure before you can apply for an EIN number. So if for example, you are looking to form an LLC, you will need to take that step first. Once your business is formed, you may apply for an EIN number. The IRS will ask for your business structure and formation date on the application.

You can apply for an EIN number online through the IRS website which you can reach by clicking here. There are some exceptions to who is eligible for processing an online application that the IRS website linked above will clarify.

There are numerous TIN alternatives available when registering as a business entity for tax purposes. Not all TIN possibilities are available to businesses, as we indicated above, and not all firms require an EIN.

You are permitted to use your social security number as your TIN if you operate as a lone owner or a single-member LLC. You may be qualified for an EIN if your company has multiple members or if you want to safeguard your privacy and avoid using your Social Security number.

The individual who “ultimately owns or controls the entity or who exerts ultimate effective control over the entity” is what the IRS refers to as a “responsible party.” The responsible party must be a person, unless the petitioner is a government body.

Please take note that each EIN can only have one responsible party.

You now understand the meaning of an EIN number, what it stands for, and how long it takes to obtain one. Additionally, you are aware of the benefits of and procedures for obtaining an EIN for your company.

If you went through the proper processes to get an EIN, you might be wondering what to do next.

It’s time to start assembling the elements required to establish a legal firm once you have your EIN number.

Maybe it’s time to:

• Open a bank account for your company.
• Create business credit to use for loans.
• Obtain business permits.
• Create agreements and relationships with vendors.
• Become a member of state registries.
• If necessary, request state employer identification information.
• Review additional stipulations relating to small businesses.
• Request credit card processing.

These particulars represent the less glamorous side of entrepreneurship. Starting a new business is an exciting endeavor. But by making the necessary preparations to correctly and legally establish your company, you can avoid a lot of time-consuming uncertainty and hassle in the future.