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What’s an EIN and do you need one?

Woman speaking to groupIf you’re starting a new business, you may need an EIN (Employer Identification Number) from the IRS. Here’s how to determine whether or not you need one as well as how to get it.

If you’re a sole proprietor or in some states, a single owner of an LLC, the good news is that getting an EIN is free! This is a relief if you’ve already had to pay for the LLC, business insurance, and city business licenses. More details on costs coming up.

What is an EIN?

Essentially, an EIN is like a Social Security Number for a business—at least in regards to paying taxes. You’ve more than likely had to enter an EIN on your 1040 from your W-2.

Do you need an EIN?

You need an EIN if you meet any of the following criteria laid out by the IRS:

  • You have or are planning to have employees in the next year
  • You are a corporation or are set up as a partnership
  • You withhold income tax on anyone you pay that’s not a resident alien
  • You have a Keogh Plan (a pension/retirement plan for a self-employed individual)
  • You are involved with:
    • Trusts, except certain grantor-owned revocable trusts
    • IRAs
    • Exempt Organization Business Income Tax Returns
    • Estates
    • Real estate mortgage investment conduits
    • Non-profit organizations
    • Farmers' cooperatives
    • Plan administrators

EIN Costs

  • Sole Proprietors are free.
  • A non profit may have a fee up to $150 depending on the state and that fee is paid to the
  • Secretary of State.
  • An LLC or Corporation may have a fee of $100 depending on the state.
  • A business partnership also may have a fee of $100 that’s determined at the state level.

Is that all?

If you don’t meet any of the above criteria, you’ll probably still want to get an EIN for a few other reasons.

  • You want to get a bank account for your business. Sometimes banks will want to see your EIN and sometimes not.
  • Business credit cards also will sometimes ask for your EIN.
  • You may also need an EIN to get business permits and licenses.
  • If you ever hire an independent contractor, you’ll need to to have an EIN in order to furnish them a 1099 in January.

You can get your EIN online in less than 10 minutes more than likely. So, you’re better off just going ahead and getting one. Let us know if you have any questions or need any help at all making sure you’re tax structure is right for you and your business.

Do you have the support you need to manage your small business bookkeeping? Schedule a 30-minute appointment to speak with a local small business adviser.

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