Two things are certain in life; death and taxes.
One of the first things any serious business is going to have to do is get into the proper position with the Internal Revenue Service. The first step to do so is to get a Employer Identification Number (EIN).In the United States an EIN is the corporate equivalent to a social security number. Although it is issued to anyone, including individuals, a EIN is pretty much a requirement for sole proprietors, corporations, partnerships, non-profit organizations, trusts and estates, government agencies, certain individuals and other business entities. The reason is simple, to keep track and identify each business and the taxes associated with it (withholding taxes on employees). So, how do you get it? It’s actually a pretty painless process.
How to get a Federal Employer Identification Number (EIN or FEIN)
Step 1.) Form a corporate entity. You can usually do this online, in most states (if it’s not your first time at a rodeo). We always recommend hiring professional help, in this case a corporate attorney, to make sure everything is properly set up. Fred Wilson has a great post regarding the differences of each entity.
Step 2.) Apply for the EIN. Either hire a lawyer to apply for you or apply online here. You can also call the IRS Business and Specialty Tax Hotline at 800-829-4933.
Who needs to get an EIN (Tax ID)?
Consult an attorney as well as your accountant prior to taking any action. You should have an EIN if you meet any of the following criteria:
- Started a new business
- Hired or will hire employees, including household employees
- Opened a bank account that requires an EIN for banking purposes
- Changed the legal character or ownership of your organization (for example, you incorporate a sole proprietorship or form a partnership)
- Purchased a going business
- Created a trust
- Created a pension plan as a plan administrator
- Are a foreign person and need an EIN to comply with IRS withholding regulations
- Are a withholding agent for taxes on non-wage income paid to an alien (such as an individual, a corporation, or a partnership)
- Are a state or local agency
- Are a federal government unit or agency
- Formed a corporation
- Formed a partnership
- Administer an estate formed as a result of a person’s death
- Represent an estate that operates a business after the owner’s death.
