On a similar note...
On a similar note...
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Becoming your own boss means having greater control and the freedom to be flexible. But it also means taking on more responsibilities, including handling taxes. One task that commands a new business owner's attention right away is applying for an EIN with the IRS. The good news: The process is straightforward, quick and free.
What is an EIN?
EIN stands for employer identification number. It is a unique, nine-digit number that the IRS assigns to businesses for tax purposes.
Who needs one?
When you form a business entity, including a corporation, limited liability company or partnership, you're required to apply for an EIN. If you’re a sole proprietor, it’s only required under certain circumstances. The IRS has an EIN questionnaire that can help you determine whether you’ll have to obtain one.
Even if it’s not required, you may want to consider getting an EIN, especially if you’re a freelancer or contractor. “It stops you from having to hand out your Social Security number to everyone,” says Russell Garofalo, founder of accounting firm Brass Taxes. Having an EIN and DBA (doing business as) name can help boost your credibility when you’re starting out. Plus, it's free.
How do I get an EIN?
The fastest and easiest way to apply for an EIN is to fill out an application using the EIN Assistant on the IRS website. Your information can be processed and validated online and you'll receive your EIN immediately. There are only two requirements for filing online: Your business must be based in the United States or U.S. territories, and you need a valid taxpayer identification number.
The EIN application, Form SS-4, can also be downloaded and faxed or mailed to the IRS. To make your life a little easier, the IRS created a detailed PDF pamphlet for each business structure that includes a line-by-line guide to filling out the form. It can take about four days to process a faxed application, and four weeks for a mailed one. If you fax or mail your application, receiving the EIN online isn't an option.
If you’re an international applicant, you’ll need to apply for an EIN over the phone. Operators can be reached at 267-941-1099 and are available weekdays from 6 a.m. to 11 p.m. Eastern time.
I have an EIN. Do I need a new one?
If you’re a sole proprietor with an EIN and you have plans to incorporate your business, you must apply for a new EIN when you change your business structure. However, each structure has different circumstances that affect whether you'll need a new EIN. Check out this list of requirements from the IRS to determine whether you need to update your EIN.
Want to know more about how to start your business?
NerdWallet has rounded up some of its best information on starting a business, including structuring and naming your company, creating a solid plan and much more. We’ll help you do your homework and get started on the right foot.