A Federal Tax ID (EIN, for employer identification number) allows the IRS to track certain business transactions. It connects tax records to individuals or corporations. The number is sometimes referred to by an old term: TIN, for taxpayer identification number.
Who Needs to Obtain a Federal Tax ID?
A Sole proprietorship with no employees can file under the owner's social security number. A Limited Liability Company with a single owner can do the same – all taxes are paid on an individual return.
A Federal EIN is required, however, when there are multiple members in the LLC. An EIN is also necessary if either a sole proprietorship or LLC is required to file excise tax. Other business structures need an EIN to separate their corporate taxes from personal taxes. The S Corporation, C Corporation, and non-profit all use the EIN. A partnership requires an EIN when filling out distribution forms for the IRS, even though no tax is paid by the partnership itself.
Where and When to Obtain an EIN
A new EIN number is required when a business is first started, or when certain circumstances change. If a business is purchased (turn-key) and it will be operated as a sole proprietorship, a new EIN is needed. This also applies if a corporation changes status, either to a sole proprietorship or partnership.
An LLC or sole proprietorship (without employees) will need an EIN if they become incorporated or take on employees. If a sole owner dies and the business is managed by their estate, the estate should apply for an EIN.
What Information is needed to Apply?
The legal business name, location and the name and address of a “responsible party” who can answer questions that might arise – this would usually be an officer or owner of the company. This person also provides his/her social security number on the application form.
Also required is a general statement about the type of business activity the company will be involved in as well as the business structure (LLC, Corp, non profit); the State (or foreign country) where the company is incorporated, and the reason for application; and an estimate of the number and type of employees expected.
Standard: 24 hours from the date the articles are filed and received in our office from the secretary of state’s office.*
Rush: The same day once the articles are filed and received in our office from the secretary of state’s office. (additional fees apply)
*Please Note: State processing times vary for each state.