What's an Employer Identification Number and Why do I need one?

If you are considering starting a professional corporation in California, you might have seen the term employer identification number or EIN. You might be wondering what an employer identification number is and why do I need one.

This is particularly important if you have decided to start a new business and form the business yourself. You will want to ensure you understand everything you need to do for the incorporation process.

This article will help explain this term and why you might need an employer identification number.

What is an Employer Identification Number?

An employer identification number, or EIN, is issued by the Internal Revenue Service (IRS) when you start a new business or hire your first employees. It is also known as a taxpayer identification number or TIN. It identifies your corporation, limited liability company, or alternate entity to the IRS. Think of the number as similar to your social security number.

Why do you Need an Employer Identification Number?

There are multiple reasons for getting an EIN during your Business formation. If you haven’t incorporated yet or formed a limited liability company or other business entity, then you need an EIN to hire your first employee. Payroll taxes require you to have an EIN. 

Opening a bank account, unless in your personal name, also requires an EIN. Also, you need an EIN to file any forms with the IRS, such as Annual Tax Returns, Payroll Taxes, or S Election, to be treated as an S corporation, also known as a Small Business Election.

What is an SS-4 Form for an EIN

Form SS-4 is the correct form if you are not filing electronically. You can submit the form by mail, by facsimile, or electronically. Depending on your location, there will be different addresses or facsimile numbers for filing your SS-4 form.

What Information do I Need to File an SS-4 Form?

You will need your business information, the primary owner’s social security number, your industry, the date you started your business, and the expectation of employees over the next 12 months.

FAQs

What is an employer identification number?

An employer identification number (EIN) is your registration number with the Internal Revenue Service (IRS). Your EIN identifies your corporation, limited liabilty company or other business entitiy.

How to get an employer identification number?

You apply for your employer identification number (EIN) from the Internal Revenue Service (IRS). You can easily apply for this online or you can use the SS-4.

What do I need an EIN for?

You must have an EIN number in order to register for a business bank account. An EIN will enable you to take on employees for your business. You also need an EIN number to file forms with the IRS such as your annual tax return. This is for all businesses, including LLC and corporation.

Final Word

The employer identification number, or EIN, is issued by the IRS to identify your corporation, limited liability company, or other entity when you start a new business or hire employees. 

You might wish to form your business yourself without an incorporation attorney. The Legal Stepz courses can guide you through the various processes involved in forming a new business.