Filing for an Employer Identification Number (EIN) is one of the first steps to making your business official. Whether you’re forming a corporation, a limited liability company (LLC), or a partnership, an EIN serves as your business’s federal tax ID, much like a Social Security number (SSN) for an individual. You’ll need an EIN to hire employees, open a business bank account, and file taxes. The process for getting an EIN is relatively simple, and you can usually complete it online in about 10 minutes.

There are a few things to consider before you file. For example, you’ll need to decide who will be the “responsible party” for your business, which is the person listed on the EIN application as the main point of contact with the United States Internal Revenue Service (IRS). Below, we’ll explain how to file for an EIN and how to avoid common mistakes that could slow the process.

What’s in this article?

• What is an EIN?
  
• Who needs an EIN?
  
• Preparing to file for an EIN
  
• How to file for an EIN online
  
• How to apply for an EIN by fax or post
  
• Common mistakes to avoid when filing for an EIN
  

What is an EIN?

An EIN is a unique nine-digit number that the IRS assigns to businesses for tax purposes, similar to an SSN for an individual. You use your EIN to identify your business when filing taxes, paying employees, or applying for certain licences.

Who needs an EIN?

You need an EIN if you plan to hire employees, form a corporation or partnership, or open a business bank account. It’s also required if you’re handling payroll taxes, applying for business credit, and for many other purposes. Even if you’re a sole proprietor, you might want to get an EIN to separate your personal and business finances and simplify your taxes.

Preparing to file for an EIN

Before you file for an EIN, there are a few things you can do to prepare. First, determine your eligibility: to apply online for an EIN, your business must be physically located within the US or its territories. You must also be able to identify a responsible party, which is the person who controls, manages, or directs the business’s day-to-day operations and has access to the business’s funds. This person must have a valid Taxpayer Identification Number (TIN) such as an SSN, Individual Taxpayer Identification Number (ITIN), or an existing EIN.

If you meet these eligibility requirements, you’ll need to gather the following information:

• The full legal name of your business and any trade names or “doing business as” (DBA) names

• The mailing address and physical address of your business

• Your entity type (e.g. corporation, LLC) and reason for applying for the EIN

• Your business’s primary activities and how many employees you expect to have in the first year

How to file for an EIN online

The easiest way for most businesses to file for an EIN is online. Here’s a step-by-step guide:

1. Go to the EIN application section of the official IRS website.

2. Click on the “Apply online now” button. Review the guidelines on the information page, then click “Begin Application”.

3. Select your business’s legal structure (e.g. sole proprietorship, LLC). The IRS provides brief descriptions for each type. Press continue.

4. Here, the steps diverge depending on your business type. If you’re applying as an LLC, for example, you’ll need to enter the number of members and where the business is physically located, while a sole proprietor will need to provide more information such as a reason for applying. State whether you are the business owner or acting as a third-party designee.

5. Input the legal name, trade name (if applicable), and physical address of your business. Specify the county and state where your business operates. This is important for tax purposes.

6. Tell the IRS why you’re applying for the EIN. For instance, are you starting a new business? Hiring employees? Restructuring an existing company?

7. Describe your business’s primary activities. The IRS will provide a list of categories you can select from.

8. Double-check all the information you’ve entered for accuracy, then submit the application. You’ll receive your EIN right away and can download or print the confirmation for your records.

How to apply for an EIN by fax or post

If you don’t want to apply for an EIN online, you can also file by fax or post. Start by downloading Form SS-4 from the IRS website and filling it in. It will ask for details including your business name, the responsible party, and the reason you’re applying. To avoid delays, double-check that all the information is correct.

• Applying by fax: Find the fax number for your state on the IRS website and fax your completed form to that number. The IRS will usually send you your EIN by fax within four business days.

• Applying by post: Find the IRS address for your state on the IRS website and post your completed form to that address. Postal applications take longer to process and it can take up to four weeks to receive your EIN.

• International applicants: If you’re applying from outside the US, you’ll need to call the IRS directly on +1 (267) 941-1099 (not a free number). Be ready with all the necessary information. The IRS will handle the process over the phone and issue your EIN once it confirms your information. This is the go-to option for international businesses that can’t easily access the online or postal processes.

Common mistakes to avoid when filing for an EIN

When filing for an EIN, it’s easy to overlook certain details that can slow down the process or lead to bigger issues later on. Here are some common mistakes to avoid.

Multiple EINs for the same entity

Many business owners make the mistake of applying for multiple EINs, usually because they’re unclear about when a new EIN is required. The IRS mandates a new EIN in only specific situations, such as a change in entity structure (e.g. moving from an LLC to a corporation) and when there’s a fundamental shift in ownership. If your business is simply expanding or developing within the same structure, you won’t need a new EIN. Filing for another number when you don’t need one can cause unnecessary complications with the IRS such as duplicate filings and incorrect tax accounts.

Incorrect or inconsistent information

Seemingly small errors such as misspelling the business name, mismatching addresses, and entering the wrong TIN can cause delays and misalignments in your IRS records, which can complicate tax returns, payroll setup, or business bank accounts in the future. Double-check all your entries, especially for the responsible party’s identification details.

Issues with third-party designees

If you’re designating someone else (e.g. accountant, lawyer) to file for your EIN, the responsible party must be formally authorised to act on the business’s behalf. The IRS requires this approval to be on record, and failing to provide proper authorisation can invalidate the application or create complications with compliance later on. Missteps here can cause delays in obtaining your EIN and lead to confusion about who’s authorised to handle tax documents on your behalf.

17. Consider business loans

Using business loans as a part of your financial strategy can be a powerful step to expedite your business growth. Here's how to approach this step:

• Determine your need for a loan: Before jumping into the loan application process, assess whether you have a genuine need for a loan. Maybe you need funds for expanding your operations, buying equipment, increasing inventory, hiring staff or smoothing out cash flow. Getting clear about your business's financial needs can help you make a more informed decision about applying for a loan.

• Research different types of loans: There are different types of loans available for businesses, from traditional bank loans and Small Business Administration (SBA) loans to alternative online loans and lines of credit. Each type comes with its own terms, interest rates and requirements. The right choice for you will depend on your specific needs, financial situation and the stage of your business.

• Consider eligibility requirements: Lenders have varying criteria for approving loans. These can include factors such as your credit score, business revenue, the profitability of your business and how long you've been in operation. Before applying for a loan, carefully check these criteria to see if you qualify.

• Prepare your loan application: Once you've chosen a type of loan and confirmed that you meet the lender's criteria, the next step is to prepare your loan application. This involves compiling financial documents such as your business plan, financial statements, tax returns and details of your collateral. You may also need to present a plan outlining how you intend to use the loan and how you will repay it.

• Compare loan offers: If your loan application is approved, you may receive offers from different lenders. Consider each offer's terms carefully, including the interest rate, loan amount, loan term and any additional fees. Be sure you understand the total cost of the loan and how the repayment terms align with your business's financial projections.

Taking on debt is a serious commitment that demands careful planning and consideration. For additional guidance throughout the process, consult with a financial advisor or mentor.

There's no easy shortcut to starting a business. Cutting corners or skipping steps in the early days can create unnecessary friction, confusion or even legal liability down the road. But while much of the work that goes into starting a new business might seem tedious, it's not overly complicated. If you take a thoughtful and methodical approach to this process, and address each step in the correct order, you'll build a foundation that can support all the goals and dreams you have for your business – exactly what motivated you to begin this journey in the first place.