Welcome back to the Scale Your Small Business Podcast with your host, Jillian Flodstrom! Today, we’re going to dig into what an EIN is, how to apply for one, why it’s important, and everything in between.
An EIN is also known as a business tax ID. Think of it as a social security number, but for your business. It’s a nine-digit number you apply for and are assigned by the IRS that you use to file taxes for your business, and it comes in handy when opening bank accounts.
Applying for an EIN seems complicated, but it’s much easier than many think. First, determine your eligibility. Make sure that your business is based here in the US, and the person that’s applying for the business tax ID number also has a valid social security number in the US. If you do provide services outside of the US, know that that doesn’t disqualify you from getting an EIN, it just means that the business has to be headquartered in the United States. At the same time, the person who’s applying for the EIN doesn’t necessarily have to be the business owner, they could just be the responsible party. You need to know what type of business entity you have, and if you’re a corporation, you’re going to want to know what state you incorporated in. Finally, make sure that you know the names of full names of all the members associated with the LLC. Be sure to check with your accountant.
You’ll need to have some basic information about your business handy: the reason for applying for an EIN, when the business was started or acquired, your primary industry, how many employees you plan to pay and the first date of payment, and a description of your product or service. Finally, check with your accountant as to what the closing date of your accounting year is.
You can apply online, by fax, or by mail. Online is easy, walks you through the process, and automatically gets you your EIN. Make sure to check with your accountant to ensure you know if your business requires an EIN.
Having an EIN allows you to separate your personal and business taxes and accounts. It also is useful if you inherit or purchase another business, or if unfortunately, you are subject to bankruptcy proceedings.
Your business is going to grow like you are. You want to make sure that you can do everything you can to let that happen.
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