Learn what EIN numbers are, how to get one, and why they are important. The EIN number is critical for all business owners to protect their personal information.
- [Instructor] Employer Identification Numbers, or EINs, are the first step in becoming a more professional business. These days most firms have to record and report major payments they make to other parties, and that means unless you have an EIN, you're going to have to give out your social security number a lot. For instance, if you operate a construction firm supplying carpet installation, you'll have to either give every builder you work for your social security number or give them an EIN. The EIN avoids the risks associated with having lots of people know your social security number. You will also need an EIN in order to set up a business banking account.
So let's take a look at how you can get an EIN for your firm. Now, I'm here at the IRS's website for registration for EINs. If you're not familiar with this site, you can find it just by googling EIN registration. So once we've done that, we're going to go through and begin our application. Now we need to choose which corporate organization form we are. Many businesses are going to be sole proprietors, in other words, you're just in business for yourself. You're probably the only employee, et cetera, or only person working for the firm.
A few firms might be partnerships. For example, law firms or real estate companies, et cetera. Bigger companies will often be organized as corporations. But probably the most common organizational form is the LLC. LLCs are cheap and easy to set up. So I'll select that one and now we have to go through and confirm that we know we're an LLC. And from here, we're going to have to tell them a little bit of information about the LLC. All right, and we have to tell them where we're physically located.
I'm just going to pick a state, Connecticut, and there's only one member in the LLC. From here, as is typical with all of the IRS forms, you're going to have to confirm a lot of different information. And we continue on. So now we say we are going to start a new business. And from here, we'll have to go through and authenticate who's responsible for the LLC. Okay, so now we need to authenticate ourselves. We need to put in our information for the purpose of letting the IRS know who we are.
So I'm going to go ahead and put in my social security number. And we're ready to continue now. So we have to put in where the business is located. So we'll say 123 Main Street and this is in Anytown, Connecticut, and we'll just say it's 06484.
And now let's say, from here we're going to put in our phone number. So because I entered a fictional physical address, we are not going to be able to find that, but I'll say accept it as entered. Okay, so now we need to put in the legal name of our LLC. I'm going to say that it's Any LLC.
We've got our business name, the county where we're doing business, so let's just say that that's Fairfield. And the state where we're doing business, and the state where we're organized. And our start month and date. And we'll continue. It's going to ask a variety of questions. Most of the time the answers are probably going to be no unless you're in kind of a specialized business.
The only exception to this is the last question. Do you have any employees? Do you expect to have employees? For most businesses, or for many businesses, the answer is going to be yes, all right. So we're going to go through and continue. And then finally they want to know when do we start paying these guys. So they want to know the total number of employees that we're going to have. We'll just say one, and we'll say that our employment tax liability is going to be less than $1000, for most businesses it'll be more.
It's not a big difference either way, though. All right, and so now they want to know which category is going to be our business. I'll pick construction. And we'll continue. And then it wants to know specific questions related to our industry. And so I'll choose answers kind of at random here. They want to know when we get done, how we want to receive our confirmation letter. Letters are easier to receive online.
And once we're done, we hit continue and that will finish out the EIN process. Now you know how to apply for an EIN on your own. You've seen that it's relatively easy to get started and minimize the work and risk associated with business taxes. Remember, you'll likely want to set up a separate LLC for each business entity, and that means you'll probably want separate EINs both for tax reasons and liability reasons.
- Quarterly business taxes at the federal and state levels
- Annual taxes at the federal and state level
- Monthly taxes at the state level
- Using a SEP account to reduce your annual taxes
- Determining if you qualify for the pass-through tax break