How to Obtain an EIN: A Step-By-Step Guide for Corporate Formation

Key Points for Business Owners

• Form your business entity first, so the EIN application matches your corporation or LLC formation documents.
• Apply for an EIN through the IRS website to receive your federal tax identification number immediately.
• Prepare accurate business details before completing Form SS-4 to avoid delays in EIN processing.
• Use your EIN to open a business bank account, hire employees, file taxes, and establish business credit.
• Review the EIN application carefully to prevent mistakes that can create duplicate EINs or incorrect IRS records.

After forming a business entity, the next step is understanding how to obtain an Employer Identification Number (EIN). The EIN issued by the Internal Revenue Service (IRS) identifies your company for federal tax purposes.

Most business owners need an EIN before opening a business bank account, filing a tax return, or paying employees. Financial institutions require a federal tax identification number before allowing companies to open accounts.

This guide explains how businesses apply for an EIN through the IRS website, the information required in the EIN application, how long approval takes, and situations where a business may need a new EIN.

What Is an EIN?

If you’ve been keeping up with our corporate formation series, your company is now like a newly constructed building, its bylaws are the blueprint, the stock ledger is the foundation, and the minutes book makes sure every floor is built to code.

Now, it’s time to install the key that unlocks the doors to opportunity: your EIN. This essential identifier allows your business to legally hire employees, open bank accounts, and comply with tax obligations, making it a crucial step in bringing your corporate vision to life.

Think of an EIN as your business’s unique identifier, similar to a Social Security Number (SSN) for an individual. Issued by the IRS, this nine-digit number is used to identify your corporation for tax purposes. Whether it’s reporting employment taxes, opening a business bank account, or applying for licenses and permits, an EIN is often the first step in making your business legally functional.

EINs are issued to many types of organizations, including corporations, limited liability companies, partnerships, certain government entities, and nonprofit organizations that apply for tax-exempt status with the Internal Revenue Service.

Why Corporations and LLCs Need an EIN

As a business owner, you will encounter several situations where an EIN becomes necessary. Banks, payroll systems, and government agencies often require this tax identification number before your company can open accounts, pay employees, or complete certain filings.

How to Obtain an EIN

Understanding how to obtain an EIN is an important step for a new business. The process is completed by following the steps below through the IRS application system.

Step 1. Determine Your Eligibility

Before you begin the EIN application, confirm that your business entity meets the eligibility requirements established by the Internal Revenue Service.

• Your business must be legally formed with a principal place of business in the United States, and must operate as a recognized business entity type, such as a corporation, partnership, or limited liability company.
• The person completing the EIN application must have a valid taxpayer identification number, such as a Social Security Number or an Individual Taxpayer Identification Number (ITIN). This person is typically the responsible party or principal officer identified in IRS records.

If these requirements are satisfied, you can proceed with the EIN application process.

Step 2. Choose Your Application Method

The Internal Revenue Service provides several ways to apply for an EIN. Each method results in the same federal tax identification number, though processing time may vary.

• Online: Most businesses choose the online EIN application through the IRS website. When the application is completed successfully, the IRS issues the Employer Identification Number immediately, allowing the business owner to begin filing tax forms or opening a business bank account.
• Fax: You may also submit a completed Form SS-4 by fax. The IRS typically processes fax applications within a few business days, after which the EIN confirmation is returned by fax.
• Mail: Businesses that submit Form SS-4 by mail may wait several weeks before receiving their tax identification number, as processing time can extend to four or five weeks.
• Phone (International Applicants): If your business entity does not have a U.S. address, you may obtain an EIN by contacting the IRS international office and providing the required business details during the call.

Step 3: Complete Form SS-4

Regardless of the method used to get an EIN, the application requires completing Form SS-4, which gathers essential information about the business entity and its ownership structure. The form connects the business’s legal identity to IRS records for federal tax purposes.

Key fields in the EIN application include:

• Legal Name: Enter the exact business name as it appears in your formation documents, such as the Certificate of Incorporation.
• Business Type: Identify the business entity type, such as corporation, partnership, or single-member LLC, along with the company’s business structure for federal tax purposes.
• Reason for Applying: Indicate why the business needs an EIN, such as forming a new business, beginning payroll taxes, or preparing to hire employees.

Review the completed form carefully before submitting it. Errors in business details or ownership information may delay processing or require corrections in IRS records.

Step 4. Receive and Secure Your EIN

Once the EIN application is processed, the IRS assigns your company its federal tax ID number. Online applicants typically receive the EIN confirmation immediately, while fax and mail submissions may require several business days or longer.

After receiving the EIN, keep the confirmation notice with your company’s important tax documents. Your business will use this tax identification number when filing federal tax returns, reporting employment taxes, and submitting certain filings, such as excise taxes, required for specific business activities.

Maintaining this number also helps keep business finances separate from personal finances and allows the company to establish relationships with financial institutions when seeking business credit or opening new accounts.

By following these steps, a business owner can obtain an EIN and position the business entity to handle tax filings, payroll reporting, and other administrative requirements associated with operating a company.

Common EIN Application Mistakes

Applying for an EIN is usually straightforward for a new business. Even so, small errors in the application can delay processing or create inconsistencies in IRS records, which may later affect tax filings, employment taxes, or other federal tax obligations.

• Incorrect responsible party
  This mistake occurs when the EIN application lists an accountant, formation service, or other third party as the responsible party instead of the business owner, managing member, or corporate principal officer who actually controls the business entity.
• Selecting the wrong business structure
  Applicants sometimes misunderstand how their business entity type is classified for federal tax purposes. For example, a limited liability company or single-member LLC may be taxed differently depending on elections filed with the IRS.
• Submitting multiple EIN applications
  Some business owners submit another EIN application if they believe the first submission failed. This can create duplicate EINs tied to the same business entity, which may later complicate tax filings and other IRS records.
• Incomplete or inconsistent Form SS-4 information
  Missing business details, incorrect business name entries, or conflicting answers about the company’s ownership structure may delay processing and require follow-up with the Internal Revenue Service before the EIN is issued.

Carefully reviewing the EIN application before submission reduces the risk of these problems. Questions about the responsible party, business structure, or entity classification often arise when a new business is learning how to obtain an EIN.

Our business lawyers regularly assist companies with formation steps, including EIN applications, to help ensure the information submitted to the Internal Revenue Service accurately reflects the company’s legal structure and tax identification number requirements.

Completing This Step in the Corporate Formation Process

Obtaining an EIN marks the point where a newly formed entity can begin operating under its own federal tax identification number. The EIN allows the company to handle tax filings, payroll reporting, and meet other administrative requirements.

Don’t miss the final article in this series, where we’ll discuss board resolutions and when they must be included in the minutes book.

Are you wondering about any of the issues mentioned above? Please email us at info@wilkinsonlawllc.com or call (732) 410-7595 for assistance.

At Wilkinson Law LLC, we give business owners the clarity they need to fund, grow, protect, and sell their businesses. We are trustworthy business advisors keeping your business on TRACK: Trustworthy. Reliable. Available. Caring. Knowledgeable.®

FAQ

Can I Get an EIN Before Forming an LLC?

In most cases, you should form the LLC first. The EIN application asks for the business entity type and legal name, which must match your LLC formation documents in IRS records.

How Long Does It Take to Obtain an EIN?

This depends on the EIN application method.

• Businesses that apply online via the IRS online application receive the EIN immediately.
• Fax applications using Form SS-4 are processed within a few business days.
• Businesses that submit Form SS-4 by mail via mail may take 4-5 weeks.
• International applicants usually receive it during the call with the IRS once the needed information is verified.

Can I Have Multiple EINs?

Yes, a business owner may have multiple Employer Identification Numbers if they operate separate business entities. Each corporation, partnership, or limited liability company generally receives its own federal tax identification number.

Do I Need a New EIN if I Change Business Structure?

Sometimes. A new EIN may be required if the business structure changes significantly, such as converting a sole proprietorship into a corporation or forming a partnership under a new legal entity.