The IRS assigns a unique Employer Identification Number (EIN) to business entities operating in the US. This nine-digit number is a type of Tax Identification Number (TIN) and functions like a Social Security Number (SSN) for businesses. Businesses use EINs for tax filing and reporting purposes, letting the IRS track tax-related activities and check compliance with tax laws.

Businesses operating in the US need an EIN to pay employees, open business bank accounts, apply for business licenses, and file tax returns. This is true even if the business owners are not physically in the US. This guide will cover how to obtain an EIN while living outside the US: the process, the costs, and what happens after your EIN is in place.

What’s in this article?

• How EINs work in the US
  
• Can nonresidents get an EIN from outside the US?
  
• What do nonresidents need to apply for an EIN?
  
• How much does an EIN cost?
  
• What are the tax obligations after you get an EIN?
  
• How to terminate your EIN
  
• How to operate a business in the US as a foreign entity
  

How EINs work in the US

The IRS uses TINs in the administration of tax laws for individuals and businesses, and most businesses in the US need an EIN to operate. This includes corporations, partnerships, and any business with employees. Sole proprietors might need an EIN if they have employees or meet certain conditions.

Businesses use an EIN for tax filing, opening business bank accounts, obtaining business licenses, hiring employees, and more. It serves as a form of identification for businesses in various legal and financial transactions. Though EINs are public information, businesses should use them judiciously—especially in public documents or online—to prevent identity theft or fraud.

• Applying for an EIN: Applying for an EIN is straightforward, and businesses can do so online through the IRS website for applications in the US. The process is free, and the IRS issues the number immediately upon completion for online applications. It’s important to use the official IRS website to avoid any unnecessary charges because third-party services might offer to obtain an EIN for a fee. Businesses can also apply by fax, mail, or phone, but online application is the fastest.

• Changing your EIN: If a business changes its structure, such as from a sole proprietorship to a corporation, it will likely need a new EIN. Not all changes in structure require a new number, so it’s important to check with the IRS or a tax professional.

• EIN expiration: Once issued, an EIN does not expire. It remains with the business entity until the business is closed or the organization’s structure changes.

Can nonresidents get an EIN from outside the US?

Yes, nonresidents can obtain an EIN from outside the US. International applicants typically cannot apply for an EIN online; that process is reserved for entities with a US address (businesses with a legal residence, principal office, or principal agency in the US might qualify). But international applicants can apply via phone, fax, or mail.

Each application method involves completing Form SS-4, the Application for Employer Identification Number. When filling out Form SS-4, international applicants must indicate the foreign status of their entity and follow the instructions for foreign entities, which include not providing an SSN or Individual Taxpayer Identification Number (ITIN) if they do not have one.

For all methods, it’s important to have all the required information ready, such as the legal name of the entity, the entity’s principal business activities, the name and address of the responsible party, and the reason for applying for the EIN.

Here’s how to apply for an EIN from outside the US:

• Phone application: International applicants can apply for an EIN by calling the IRS at the number designated for international applicants found on the IRS website. The person making the call must be authorized to receive the EIN and answer questions regarding Form SS-4.

• Fax application: International applicants can fax a completed Form SS-4 to the IRS. If they provide a return fax number, the IRS can send the EIN within four business days.

• Mail application: International applicants can submit a completed Form SS-4 to the IRS by mail. This method is the slowest, taking about four weeks to obtain an EIN.

What do nonresidents need to apply for an EIN?

Nonresidents applying for an EIN for a foreign entity need to be able to provide the requested information on Form SS-4 detailed below.

• Entity’s legal name: The official name of the business as registered in the country of origin.

• Entity type: The type of entity (e.g., corporation, partnership, LLC) and any relevant details about the business structure.

• Reason for applying: Why you are requesting an EIN (e.g., to start a business, to hire employees, to open a business bank account).

• Responsible party: The name and identifier for a designated individual who has control over or is entitled to the entity’s funds and assets. The identifier can be an SSN for US residents or a foreign passport number or similar identifying number for nonresidents. For nonresidents, the designated responsible party is often a principal officer or controlling individual.

• Mailing address: If the business doesn’t have a US mailing address, it can provide an international address instead.

• Principal business activity: The primary nature of the business, including products sold or services provided.

• Number of employees: If the business doesn’t have employees but will in the next 12 months, it can estimate the number of employees it will hire. This section should also indicate the employee type (i.e., agricultural, household, other).

• First date wages or annuities were paid: This is relevant only if the business will have US-based employees.

How much does an EIN cost?

Obtaining an EIN from the IRS is free for all businesses, regardless of where they are based.

Though the EIN is free, there might be associated costs for businesses not based in the US if they hire tax professionals or legal advisors to help them deal with the application process or understand their tax obligations in the US.

What are the tax obligations after you get an EIN?

Businesses operating in the US must fulfill a series of tax obligations. Once you obtain an EIN to operate in the US, these tax obligations might apply:

• Income tax filings: Businesses must file annual income tax returns. The specific form they must use depends on the business structure (e.g., Form 1120 for corporations, Form 1065 for partnerships, and Form 1040 for sole proprietors).

• Employment taxes: If the business has employees, it must withhold federal income tax, Social Security taxes, and Medicare taxes from their wages. The business also needs to pay the employer’s share of Social Security and Medicare taxes, along with federal unemployment (FUTA) tax.

• Excise taxes: Some businesses are responsible for excise taxes if they manufacture or sell certain products (such as fuel, tires, or tobacco), use various kinds of equipment, facilities, or products, or receive payment for certain services.

• Estimated taxes: Business owners and entities might need to make estimated quarterly tax payments if they expect to owe tax of $1,000 or more when their return is filed. This is especially relevant for entities where income is passed through to the owners, such as S corporations and partnerships.

• State and local taxes: Businesses need to be aware of and comply with any state and local tax requirements, which can include income, sales, property, and employment taxes.

• Reporting: Businesses must provide the IRS and their employees with information returns (e.g., Forms W-2 and 1099) to report transactions such as payments to independent contractors and employee wages.

How to terminate your EIN

Though the IRS does not technically cancel an EIN (the number is never reassigned and remains associated with the business entity to which it was issued), these steps effectively close your business’s tax account with the agency:

• File final tax returns: Your business must file a final tax return. For corporations, this would be Form 1120; for partnerships, Form 1065; and for sole proprietors, a final Schedule C (Form 1040). Check the box that indicates this is a final return. If you have employees, you must also file the final employment tax returns, including final federal tax deposits of these taxes.

• Pay outstanding taxes: Pay all outstanding taxes including income taxes, employment taxes, and any other federal taxes for which your business is responsible.

• Issue final wage and payment reports: If your business had employees, issue final W-2 forms to employees and file them with the IRS. If you’ve paid independent contractors $600 or more during the business’s final year, issue a Form 1099-NEC to each contractor, and file these with the IRS.

• Cancel your business name: If applicable, cancel your business name with the appropriate state or local agencies.

• Close your business account with the IRS: Send a letter to the IRS that includes the complete legal name of the entity, the EIN, the business address, and the reason for closing the account. If you have any IRS-issued licenses, permits, or other authorizations, return these with the letter, and indicate the date on which you stopped paying wages.

• Notify state and local agencies: Inform state and local tax agencies and any other relevant agencies of your business’s closure. You might also need to cancel your state business license, state employer accounts, and any local permits.

• Keep records: Maintain your business records for a minimum of three years after closing your business because the IRS might request information within this period. Some records, especially those related to employment taxes, should be kept longer.

How to operate a business in the US as a foreign entity

Foreign entities operating a business in the US must go through many of the same processes as US residents. Here’s an overview of what’s involved:

• Business structure: Research and choose a suitable business structure. Common options for foreign entities include the corporation (C corp) and the limited liability company (LLC).

• State selection: Decide on which state to incorporate in. Delaware, Nevada, and Wyoming are popular because of business-friendly laws. Consider factors such as tax rates, the legal environment, and the physical presence of your business.

• Business registration: Register your entity by filing the necessary documents such as Articles of Incorporation (for corporations) or Articles of Organization (for LLCs) with the chosen state’s secretary of state office.

• EIN: Apply for an EIN with the IRS as outlined in this guide.

• Business bank account: Opening a business bank account typically requires the business owner or a representative to be in the US to provide the EIN, incorporation documents, and identification.

• Insurance: Procure appropriate insurance to mitigate risks associated with your business activities in the US.

• Taxation: Understand your federal, state, and local tax obligations, including income taxes, payroll taxes, and sales taxes. International businesses might also need to consider tax treaties between the US and their home country to avoid double taxation.

• Employees: If hiring, comply with US employment laws regarding wages, workplace safety, nondiscrimination, and benefits. Obtain any necessary employer identification numbers at the state level, understand the obligations for withholding and paying payroll taxes, and familiarize yourself with labor laws.

• Licenses and permits: Identify and obtain relevant federal, state, and local licenses and permits. These vary depending on the industry and business activities.

• Immigration and work visas: If foreign nationals will work in the US, ensure compliance with immigration laws, including obtaining the correct visas. This might involve L-1 visas for intracompany transfers, E-2 visas for investors, or H-1B visas for specialized employees.

• Ongoing compliance: Maintain ongoing compliance with annual reporting, tax filings, and renewals of licenses and permits. Stay informed about changes in laws that might affect your business. Consult with attorneys and accountants specializing in international business, especially for complex matters such as international tax planning, intellectual property protection, and compliance with the Foreign Corrupt Practices Act.