Once you’ve committed to creating your business, you’ll have to decide whether to incorporate it with the appropriate Secretary of State’s office. If you decide to file an application to incorporate (as I think the vast majority of people should), it shouldn’t take long to hear back about whether your application is approved. Unless you’ve made some glaring error, you’ll probably hear back quickly, and….voila! You’re now officially a registered business owner.

The next step is pretty straightforward–it’s time to apply for a Tax Employer ID Number (“EIN”) from the IRS (also referred to as a tax ID number). The Tax ID number is kind of like a social security number for a business–it lets the IRS know where it needs to go collect its tax dollars.

Ya’ll know the IRS wants its money and wants it on time.

How to determine whether you need a tax ID number.

If you’re a sole proprietorship or an LLC with no employees, you don’t have to have a separate Tax ID number for your business.

There are some benefits to getting a Tax ID number even if you don’t have to have one:

  • Your business will need a Tax ID number to open a bank account or get a business credit card.
  • It is also helpful to have a Tax ID number when you’re applying for business permits and licenses.
  • If you’re signing contracts and getting paid by other people, they’ll need some identification number. If you don’t have a Tax ID number, you’ll probably have to share your social security number with the parties paying you.
  • Having a Tax ID number will keep your personal money and business funds completely separate, which is a good thing for other legal reasons.

Corporations, partnerships, and LLCs with employees do have to have a separate Tax ID number.

To determine whether you need a Tax ID number, check out the below questions. If you answer “yes” to any of them, you need a Tax ID number.

Do you have employees?

Is your business as a corporation or a partnership?

Do you file any of these tax returns: Employment, Excise, or Alcohol, Tobacco and Firearms?

Do you want to save money in a Keogh or a 401k?

Do you withhold taxes on income, other than wages, paid to a non-resident alien?

Are you involved with any of the following types of organizations?

Getting a Tax ID number is easier than you think!

Once you’ve figured out whether you need a Tax ID number, the process is pretty straightforward. Most people should feel comfortable doing this on their own. The best way to apply for a Tax ID number is to apply online – this is the preferred method. You can find the link in the button below.

Once you start the application you’ll have 15 minutes to complete it. The application cannot be saved to come back to later. After you complete the application, you’ll get your new Tax ID number immediately! You should download and save everything, but you’ll also get a letter by email confirming the details.

The online application process is available for all entities whose principal business, office or agency, or legal residence (in the case of an individual), is located in the United States or U.S. Territories.

If you can’t apply online, there are other ways, including fax, mail, and phone. For fax and mail, you’ll have to complete Form SS-4 and then send it to the appropriate party via the IRS guidelines.

You can learn more about these other application processes by clicking this link.

FYI, you are limited to one EIN per responsible party per day. The “responsible party” is the person who ultimately owns or controls the business or who exercises ultimate effective control over the business. Unless the applicant is a government entity, the responsible party must be an individual (i.e., a natural person), not another business entity.

So there you have it! Once you do this, you’re well on your way to having a legit business.

Let us know when you’ve crossed this milestone! This may seem like a small step, but we have to celebrate our successes large and small. So many people have wishes and dreams of starting a business but never do, so congratulations on taking the step!

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