Every company that has employees is required to have an employer ID number (EIN), but you may need an EIN even if you do not have employees, to start your business. It is the Social Security number of your business.
1. What is an EIN?
EIN is a number that is assigned by the Internal Revenue Service for identifying the business for tax purposes. You should include the tax ID of your business on bank account applications, income tax forms, and employment tax reports and payments.
Like Social Security numbers, the business tax ID serves the same as Social Security does for individuals.
2. How EIN is different from a Taxpayer ID Number
The term "taxpayer ID" can be one of various numbers. An employer ID is referred to as a taxpayer ID for a business, whereas a Social Security number is a taxpayer ID for an individual. Another type of tax ID is referred to as the "Individual Taxpayer ID." This is used by individuals who do not have a Social Security number.
3. Do you need EIN for your business?
You will require an EIN for your business if you have employees or if you file certain kinds of taxes. You will require one if your business is taxed as a corporation or a partnership.
EIN is not required for tax purposes if your business is a sole proprietorship, you are not registered with your state as an LLC, a corporation, or a partnership and you don't have employees. In this circumstance, your EIN is your Social Security number.
But an EIN might be required at the time you start your business and apply for a business checking account. You might also require one when you are applying for a business license.
4. When do you need a new EIN?
A new EIN is not required if you simply change the name or address of your business.
You do not require a new EIN if you make simple changes to your business, but if you change your legal business structure from a corporation to some other entity or from a sole proprietorship to a corporation, you may need a new one.
You should inform the IRS if your business changes and the IRS will inform you if you need a new EIN.
You must send a change request letter to the appropriate IRS location if you made a mistake on your EIN application or on the form, in party 3, the party which will occur must be responsible.
5. Tax-Exempt Organizations
Tax-exempt organizations have special rules. The IRS recommends that you must make sure the business structure of your organization is firmly nailed down before you apply for your EIN.
It is because you can lose your tax-exempt status if you make certain mistakes within three years, e.g. failing to file a return. The calendar begins with the date you get your EIN.
6. Are EINs recycled?
Your EIN is like your tax/legal fingerprint. It cannot eventually end up with another business if your business ceases to operate. It will not expire. When you are finished with it, it will go forever.