Top 3 Uses of an Employer Identification Number (EIN)

An Employer Identification Number (EIN), also known as a Federal Employer Identification Number (FEIN), is a number issued and used by the IRS to identify legally established businesses and persons for reporting and tax filing purposes. 

The Employer Identification Number is essentially your Social Security Number for your business and separates the business from the owner. 

In a time when several businesses can exist using the same name, EIN separates the various businesses in the eyes of the IRS.

Besides identification purpose, an EIN is also required for other legal purposes including:

  • Opening a bank account
  • Application for business licenses 
  • Filing a tax return


Who Needs an Employer Identification Number (EIN)?

According to the Internal Revenue Service (IRS), you must have an EIN if any of the following criteria apply to your business: 

  • You have employees 
  • You operate your business as a Partnership, Corporation or Limited Liability Company (LLC)
  • You withhold taxes on any income other than wages, paid to a non-resident alien (including independent contractor income) 
  • You have a Keogh Plan (tax deferred pension plan) or Solo 401(k) retirement plan 
  • You file the following tax returns: Employment, Excise, or Alcohol, Tobacco and Firearms, or
  • You are involved with any of the following organizations:
    • Trusts
    • Estates
    • Non-profit organizations
    • Plan administrators

Sole proprietors don't need to obtain an EIN but can instead use their Social Security Number. But even then, sooner or later, you may want to obtain an Employer Identification Number.

 

How to Get an EIN if You have a Social Security Number or ITIN

If you have a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN), acquiring an EIN from the IRS is fast and easy and is completely free by applying online here.

 

How to Get an EIN If you are a Foreign without a Social Security Number or ITIN

However, if you are a foreign and you do not have a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN), the following process should be followed:

  1. Retain a business lawyer to act as a third-party designee for your business. 
  2. The business lawyer will prepare an Application for Employer Identification Number on your behalf.
  3. The business lawyer will contact the Internal Revenue Service Center for International applicants and fax the signed form to the Internal Revenue Service (IRS).
  4. The business lawyer will receive the Employer Identification Number for your business on your behalf.

To guarantee completion of the EIN application process, it is highly recommended to have a business lawyer act as your third-party designee apply for your EIN on your behalf. We have successfully obtained EINs for more than 60 clients in the past year.

► If you do not have a Social Security Number and you need an Employer Identification Number (EIN), contact Sam Mollaei, Esq., business lawyer, via email at sam@mollaeilaw.com or by phone (818) 925-0002.


The 3 Main Uses of an Employer Identification Number

Opening a Bank Account

A business checking account helps business owners to separate their affairs and assets from personal affairs and assets. Failure to maintain a separate bank account could plunge the business owner into personal liabilities, especially if the owner does not treat the business as a separate entity.

Before you can open a business checking account, you’ll have to obtain an Employer Identification Number for your business as your bank will ask for it.

For instance, the Bank of America requires businesses that want to open an account to bring an EIN and copies of their business formation documents. In some cases, a sole proprietorship may not be required to have an EIN to open a business checking account -- in this situation, a Social Security Number will suffice.


Application for Business Licenses

In some jurisdictions, you're required to have an Employer Identification Number to apply for your business licenses and permits. 

For example, Los Angeles City issues business licenses in form of business tax certificates as a tool for collecting their business taxes. Therefore, the city of Los Angeles expects all businesses to have their Employer Identification Number on record. 

 

Filing a Tax Return via Mail

Based on the information you’ll submit on your application for an EIN such as when you indicate that you’ll have employees, the IRS system will automatically enroll you in the Electronic Federal Tax Payment System (EFTPS), allowing you to make your deposits by phone or online. 

 

► If you do not have a Social Security Number and you need an Employer Identification Number (EIN), contact Sam Mollaei, Esq., business lawyer, via email at sam@mollaeilaw.com or by phone (818) 925-0002.