Starting or growing a business in the USA comes with many steps, one of the first being the application for an Employer Identification Number (EIN).
This ventilating number is essential for everything from setting up bank accounts to settling tax obligations. But what is an EIN now and why is it such a big deal, especially for foreign business owners?
In this detailed guide, we will dig into the aspect of what is an EIN Number and who qualifies for it, how one can acquire it, and what services such as Bizstartz can provide to simplify the process.
What is EIN Number?
An Employer Identification Number (EIN) is a 9-digit number issued to business organizations in the United States by the Internal Revenue Service (IRS) for identification purposes. Although, it is usually likened to a Social Security Number (SSN), but this time, it is for a business.
An EIN enables tax authorities in the U.S. and other government institutions to monitor the taxation and financial activities of the business.
The number is in the format of XX-XXXXXXX and is distinct to your business. It serves as a perpetual identifier number for your company even if the company’s name or location changes.
Every kind of entity use the number; LLCs, corporations, nonprofits, partnerships and even some sole proprietorships.
Here are other names that are commonly used in place of EIN:
- Tax Identification Number
- Employer Identification Number (FEIN)
- Business ID Number
Why is an EIN Number Required:
1. To Open a Business Bank account.
To Open a Business Bank account with financial institutions, a verified EIN is a prerequisite. This creates a financial barrier between your personal and business activities. Having a business account not only makes financial tracking more seamless, it also improves the company’s reputation with customers, investors, and suppliers.
2. Hiring Staff
If any time in the future your business is going to expand its workforce, then an EIN is mandatory. The IRS utilizes this number to manage employment-related taxes such as Social Security and Medicare. Also, all tax payments related income withholdings, an EIN is a must. Without an EIN, a business cannot legally employ personnel in America.
3. Paying Federal and State Taxes
An EIN is an important requirement for the payment of corporate or partnership taxes together with income and payroll taxes as well. It is also required for the acquisition of some local permits such as sales tax or franchise tax registration. Businesses claim to use their EIN to report income, expenditures and tax obligations during the year.
4. Getting Licenses and Permits
Business licenses and permits, no matter if they are federal, state, or local, normally require an EIN to process. This covers specific licenses pertaining to industries such as healthcare, transportation, and food services.
5. Establishing Business Credit
Having an EIN allows your business to create its own credit profile distinct from your personal credit history. This is crucial if you intend to seek loans, credit cards, leases, or vendor financing in the name of your business.
6. Meeting Compliance Requirements
The EIN aids in remaining compliant with federal regulations, which includes annual filings and reports. It is also utilized for informational filings such as the Beneficial Ownership Information (BOI) report that most U.S. businesses now have to file under the Corporate Transparency Act.
Steps to Apply for an EIN Number
Getting an Employer Identification Number (EIN) is one of the first steps to setting up your business in the United States.
No matter if you’re a local resident or an international businessperson, doing everything the right way means that everything will be handled in a timely and precise manner. As such, check out the guide below on how to get an EIN.
Let’s move onto the steps of applying for an EIN.
Step 1: Determine Your Eligibility
- You should already know that the business needs to be registered legally in the United States or any U.S territories.
- An individual needs to be appointed who will be the “responsible party” or in simple words, the person who controls, manages, or owns the business. For the U.S, this person usually needs to have a social security number. For foreign applicants, there is no need of an SSN or ITIN to apply.
- You should not have an existing EIN unless there has been a change in the business structure.
Following these requirements can help in solving compliance issues that are set by the IRS. The goal here is to avoid duplication.
Step 2: Properly Fill Out Form SS-4
SS-4 is the formal application form you fill out to get an EIN from the IRS. Although it seems straightforward, a lot of EIN applications get stuck due to complications arising from this form. Information you will require includes:
- Complete name of the entity or individual
- Business’s mailing and physical addresss
- Business entity type (e.g., LLC, corporation, partnership)
- The state and date of formation
- Purpose of applying (e.g., starting a new business, enrolling new employees, or opening a bank account)
- If an LLC, number of members
- Responsible party details (name, title, and SSN/ITIN if applicable)
- Main industry and business activities
Foreign applicants must write ‘Foreign’ in the SSN section if they lack a US tax ID. Also, indicating that the entity, if applicable, is a foreign-owned LLC is crucial so as not to misclassify the entity.
Step 3: Knowing the Submission Method Correctly
Your location and eligibility determines how you submit Form SS-4. Here are the options:
Online (Charged only to United States Citizens):
- Only residents can apply through the IRS EIN Assistant tool, which is instantaneous and issues an EIN right away, but only if one has a US address with a designated party having a SSN or ITIN.
Fax (Best for Foreign Applicants):
- Applicants need only fax the completed Form SS-4 to either +1-855-641-6935 for US applicants or +1-304-707-9471 for international applicants. Provided the form is filled out accurately, processing usually takes 3-7 working days.
Mail:
As this is the slowest method, applicants may take up to 6 weeks straight. Send your completed form to:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
Phone (International Applicants Only):
- Non US applicants without an SSN or ITIN may achieve a particular EIN simply by calling the IRS on +1-267-941-1099 where they will step by step navigate you through the assigning process during the telephonic conversation as long as you provide accurate information.
Step 4: Receive Your EIN
The IRS will determine how you receive your EIN number. In this case, more securely:
- Online: Through the confirmation with the webpage as the screen will display it instantly, yet remain restricted to only US residents.
- Fax: Confirmation of your EIN will be sent with a return fax, inclouding a letter (usually Form CP 575).
- Mail: You will receive the confirmation letter as stated with a postal mail.
- Phone: EIN can be claimed verbally and the confirmation letter will be sent later.
Important: Banks, tax agencies, or other institutions could require your EIN confirmation letter, so remember to keep it safe with you.
Step 5: Use Your EIN For All Business Functions.
With your Business Identification Number (EIN) , the following steps can be completed:
- Open a business bank account.
- Obtain business licenses and permits.
- Pay filed taxes.
- Hire employees.
- Register with PayPal or Stripe.
- Establish business credit.
For compliance purposes, each form, account and government interaction should be filled in under the same literal and figurative umbrella – the provided EIN.
Step 6: Maintain Precise Business Records.
After your EIN is issued, maintain detailed records of:
- Assignment letter of original CP 575.
- SS-4 form copy.
- Correspondence with the IRS.
- Documentation for IRS linked businesses.
Keep documents handy as they may be important to deal with legal and tax compliance or issues such as audits or loss of EINs.
Benefits of an Employer Identification Number
Obtaining an EIN opens doors to numerous benefits beyond compliance:
Professional Appearance: A business looks more professional when they present an EIN while invoicing clients or vendors.
Access to US Banks: Corporate accounts with American banks, which are key for international transactions, require EINs.”
Payment Gateway Access: Usually, merchant accounts are only issued by Stripe, PayPal, and Square, among others, to businesses with an EIN and a US bank account.
Business Identity: An EIN allows your business to operate under its own identity, thereby minimizing personal liability and confusion in transactions.
Eligibility for Funding: An EIN is needed by most lenders and grant making organizations as part of the applications evaluation process.
Better Recordkeeping: It assists in keeping distinct and precise accounting records, which is important during planning audits or financial audits.
What Happens If You Lose or Misplace Your EIN?
An EIN is not a sensitive document because losing it does not mean your company will suffer. However, it is important to regain it in order to perform a number of administrative tasks.
Steps to Follow
- Review Previous Documents: Review previous tax returns, bank account documents, or the confirmation IRS issues (CP 575 Notice) letter.
- For Other Concerns Contact the IRS: The IRS Business & Specialty Tax Line may be reached at: 1-800-829-4933. They are open Monday to Friday between 7 AM to 7 PM local time.
- Check for IRS Notices: Any former correspondence with the IRS will roughly paginate your EIN.
- Try Not to Apply Again: Do not apply for a new EIN unless your business entity has changed, for example, if you incorporate or add members to your LLC.
How Long Will It Take to Get an EIN Number?
The processing time varies based on the given method of application as well as the applicant’s residing location:
- There is immediate issuance of an EIN for online applications for entities located within the United States.
- For applications via fax, it may take 3-7 business days assuming all relevant information is provided.
- For mail applications, it takes around 4-6 weeks.
- Phone (International applicants): Immediate, if all details are accurate
Foreign-owned entities should expect their EIN in 2-4 weeks depending on the IRS workload. Utilizing a service provider such as Bizstartz aids in avoiding delay caused by incomplete forms or inaccurate details.
How to Cancel an EIN Number
An EIN is considered null when a business cancels its operations, or the business states it no longer needs it. An entity can formally cancel an EIN, however it should be noted that it will never be deleted.
How to Cancel:
Write A Letter To The IRS That Includes Your:
- Name of the business
- Employer identification number (EIN)
- Address
- Reason why you are closing the account.
Don’t Forget To Attach The Original EIN Assignment Notice
- If you have it, attach the CP 575 letter that was issued with the EIN.
Mail To :
The Internal Revenue Service At The Following Address:
Cincinnati, OH 45999
As a result of your application, the IRS will acknowledge the cancellation in writing and your account status will show as inactive.
How Bizstartz Can Help You Get Your EIN Number
To our customer and non residents who are entrepreneurs, we together with our partners offer apply for an EIN through:
✅ Draft and Submit SS-4
✅ Application For An EIN Without SSN Or ITIN
✅ Tracking To And After The IRS
✅ Issuing An EIN Within 1 To 3 Weeks
✅ Providing Complete Service Of Forming An LLC And Setting Up A Business
✅ Additional Help: Opening Bank Accounts, BOI Filing, ITIN, Bookkeeping
As a business owner all you have to do is brief us on what your business is about, and run it while we handle the red tape and get you your EIN number.
Closing Remarks
If you’re considering starting a business in the United States, an EIN will be crucial for your identity and recognition. It achieves much more than strictly tax purposes. It empowers your business whether you are hiring employees, opening a bank account, or dealing with vendors.
Coupled with proper guidance however, foreign entrepreneurs seeking to apply for an EIN don’t have to deal with complications. The expert suggestions provided by Bizstartz enable for confidence and speed to navigate the process.
What are you waiting for? If you want to enhance your buisness image and identity in the U.S, reach out to us today and get your EIN Business Number starting with Bizstartz!
Frequently Asked Questions (FAQs)
Does personal citizenship matter to apply for an EIN?
No. You may apply for an EIN as a foreign citizen through form SS-4 whether you have a social security number or not.
Is applying for an EIN free?
No. While the service does not charge you for obtaining it, any external taxes you incur while submitting your application will not be free. In this case external taxes are likely a third party service fee.
Once an EIN is issued, can it be used right away?
It can be used immediately after being received for various tasks such as opening bank accounts, applying for business licenses, and filing taxes.
What happens if I made an error on my application for EIN?
You would have to go to the IRS to rectify the issue or in certain conditions, submit a fresh application. These kinds of problems can be avoided by using a professional service.
Does your EIN expire?
No. An EIN does not expire, however, some businesses may be required to get a new EIN after closing their business or changing their legal structure/affiliation.
