An Employer Identification Number (EIN) is also known as a Federal Tax Identification Number, and is used to identify a business entity. Generally, businesses need an EIN. The process for determining if your business needs an EIN is complicated. Below is how you can determine whether or not you need an EIN number:

If you are the sole proprietor of a company, you will need an EIN if any of the following statements are true:

• You are subject to a bankruptcy proceeding
• You have incorporated your company
• You have taken in partners and operate as a partnership
• You purchased or inherited an existing business that you operate as a sole proprietorship

You will not be required to obtain a new EIN if any of the following statements are true:

• You have changed the name of your business
• You have changed your location and/or add other locations
• You operate multiple businesses

If you choose a corporation status, you will be required to get an EIN if any of the following statements are true:

• Your corporation receives a new charter from the secretary of state
• You are a subsidiary of a corporation using the parent company’s EIN or you become a subsidiary of a corporation
• You changed to a partnership or a sole proprietorship
• A new corporation is created after a statutory merger

You will not be required to obtain a new EIN if any of the following statements are true.

• You are a division of a corporation
• The surviving corporation uses the existing EIN after a corporate merger
• Your corporation declares bankruptcy
• Your corporate name or location changes
• Your corporation chooses to be taxed as an S corporation
• Reorganization of your corporation changes only the identity or place of business

To apply for an EIN, you will need to prepare and submit an IRS form, called the SS-4. Fortunately, you can fill out and submit an SS-4 online using the URL provided below:

https://sa1.www4.irs.gov/sa_vign/newFormSS4.do

COMPLETING AN SS-4 FORM
To complete the online SS-4 form or the paper SS-4 form carefully follow these steps:

1. Identify the legal name of your new company. You enter the new full legal name of your company into box 1.

2. Identify the trade name if that name differs from the legal name. As the form indicates, you enter the trade name of the business into box 2 if your trade name differs from the legal name.

3. Provide the firm’s address. You enter the mailing address information into boxes 4a and 4b. If the business’s street address differs from the mailing address, you also need to enter the street address into boxes 5a and 5b.

4. Identify the county and state of the new business. For example, if the county is Anycounty County, you enter Anycounty into the County box of box 6 and then enter your state into the State box.

5. Identify yourself. To do this, enter your full name into box 7a. Then, enter your social security number, individual taxpayer identification number, or EIN, into box 7b.

6. Identify your business entity. If you have chosen an LLC, in box 8a, mark the “Other” box. Enter “single member LLC” if your LLC has one owner.

7. Explain why you need an EIN. Mark one of the buttons in box 9 to indicate the reason you are requesting the EIN. For example, if you have just set up an LLC for a new business, you can mark the “Started New Business” button. You might also mark the “Other” business and then enter “LLC formation” into the blank box provided. If you indicate you are starting a business, briefly describe the type of business using the space provided.

8. Indicate when business activity started. Using box 10 of the SS-4, indicate when your business started using the month, day, and year from drop-down list boxes.

9. Identify the last month of the accounting year using box 11. In most cases, an accounting year ends in December. This is what you will enter into box 11 unless you are selecting a month other than December.

10. Indicate when you first paid or will first pay wages using the drop-down list boxes in box 12. For example, if you first paid or will first pay wages January 1, 2010, you enter JAN 1, and 2010.

11. Use box 13 to indicate how many employees you plan to have. Alternatively, if you do not expect to have employees, enter a 0 into the Agriculture, Household, and Other boxes.

12. Describe (at least in a general way) the principal activity of your new business using box 14.

13. Describe what you sell. Use box 15 to describe the principal product or service provided.

14. Indicate whether you have previously applied for an EIN. You can do this by marking either the ‘Yes’ or ‘No’ box in box 16a. If you indicate that you have applied for an EIN before, fill in the blanks in box 16b with the old entity’s legal and trade name. Then, if possible, use box 16c to specify when you previously applied for the EIN, the city and state where you applied, and the actual EIN.

15. Submit the SS-4 form to the IRS. If you are using the online version of the SS-4 form, you simply click the ‘Next’ button to submit the SS-4 to the IRS. The IRS server then validates the SS-4 form you have filled out.

If the IRS server finds an error, it re-displays the form with red messages describing the error. You need to fix the error and click the ‘Next’ button again. If the IRS server does not find any errors, it gives you a preliminary EIN number.

Print the web page that provides the EIN for your records. Additionally, scroll down the page to the hyperlink that says “click here to print a completed version of the SS-4” form. Following the on-screen instructions, print a copy of the completed SS-4 form.

If you’ve prepared a paper version of the SS-4 form you can mail or fax it to the following address or fax number:
Attn: EIN Operation
Philadelphia, PA 19255
Fax-TIN: 859-669-5760
WWW.IRS.GOV

I’d like to hear what you’ve got to say about the legalities of setting up a business. Please leave a comment…