Get a FEIN to Open a Business Bank Account: Here’s How
Starting a business is an exciting endeavor, filled with planning, execution, and a whole lot of learning. One of the crucial steps in legitimizing your business and managing its finances effectively is opening a dedicated business bank account. But to do that, you’ll almost certainly need a crucial piece of identification: a Federal Employer Identification Number, or FEIN.
Think of a FEIN as a Social Security number for your business. It’s a unique nine-digit number assigned by the Internal Revenue Service (IRS) to identify business entities. While not every business needs one, it’s almost always required to open a business bank account and offers several significant advantages.
Why Do You Need a FEIN for a Business Bank Account?
Banks use FEINs to track business transactions and report them to the IRS. Here’s a breakdown of why it’s necessary:
- Legal Compliance: Banks are legally obligated to collect and report information about their customers, including businesses. A FEIN helps them fulfill these obligations.
- Identification and Verification: The FEIN allows the bank to accurately identify your business and verify its legitimacy. This helps prevent fraud and money laundering.
- Separation of Personal and Business Finances: Using a separate business bank account with a FEIN ensures a clear separation between your personal and business finances. This is crucial for accurate bookkeeping, tax preparation, and liability protection.
- Professionalism and Credibility: Having a business bank account with a FEIN lends credibility to your business. It shows potential customers, vendors, and partners that you are a serious and legitimate enterprise.
Who Needs a FEIN?
The IRS requires certain types of businesses to obtain a FEIN, including:
- Corporations: S corporations, C corporations, and limited liability companies (LLCs) taxed as corporations.
- Partnerships: General partnerships, limited partnerships, and limited liability partnerships (LLPs).
- Certain LLCs: LLCs with more than one member, or LLCs that elect to be taxed as a corporation or partnership.
- Trusts and Estates: If you manage a trust or estate as a business, you’ll likely need a FEIN.
- Employers: Businesses that hire employees are required to have a FEIN for payroll and tax purposes.
Even if your business isn’t legally required to have a FEIN (for example, a sole proprietorship without employees), obtaining one is highly recommended for the reasons outlined above, particularly for opening a business bank account.
How to Obtain a FEIN
The process of obtaining a FEIN is surprisingly straightforward and free of charge. Here’s a step-by-step guide:
- Determine Your Eligibility: Ensure your business entity type requires or would benefit from a FEIN.
- Prepare Your Information: Gather the following information:
- Business Name: The legal name of your business.
- Business Address: The primary address of your business.
- Type of Business: Corporation, LLC, Partnership, Sole Proprietorship, etc.
- Reason for Applying: State why you need the FEIN (e.g., opening a bank account, hiring employees).
- Responsible Party Information: The name, Social Security number (SSN), and other details of the individual responsible for controlling, managing, or directing the entity and the disposition of its funds and assets.
- Apply Online: The easiest and fastest way to apply for a FEIN is through the IRS website.
- Go to the IRS website and search for “Apply for an Employer Identification Number (EIN) Online.”
- You’ll be directed to the IRS’s online EIN Assistant.
- Follow the instructions and answer the questions carefully.
- Complete the Application: The online application is interactive and will guide you through the process.
- Submit and Receive Your FEIN: Once you’ve completed the application, submit it electronically. If your application is valid, you’ll receive your FEIN immediately online.
After Receiving Your FEIN:
- Keep it Safe: Treat your FEIN like your Social Security number. Store it securely and only share it with trusted parties when necessary.
- Use it for all Business-Related Activities: Use your FEIN for all business-related activities, including opening a bank account, applying for licenses and permits, and filing taxes.
- Update Your Information: If your business information changes (e.g., address, responsible party), you may need to update your FEIN information with the IRS.
Choosing a Business Bank Account
Once you have your FEIN, you can start researching and choosing a business bank account that meets your needs. Consider factors such as:
- Fees: Monthly fees, transaction fees, overdraft fees, etc.
- Minimum Balance Requirements: The minimum amount you need to maintain in your account.
- Online Banking Features: Online bill pay, mobile banking, and other online features.
- ATM Access: The availability of ATMs and any associated fees.
- Customer Service: The quality and responsiveness of the bank’s customer service.
- Credit Card Processing Integrations: Some banks offer seamless integrations with credit card processing services, like Authorize.net.
FAQs
- How long does it take to get a FEIN? If you apply online, you’ll typically receive your FEIN immediately upon submitting a valid application.
- Is there a fee to get a FEIN? No, the IRS does not charge a fee to obtain a FEIN.
- Can I apply for a FEIN if I’m not a U.S. citizen? Yes, you can apply for a FEIN even if you’re not a U.S. citizen. However, you’ll need to provide a valid Taxpayer Identification Number (TIN).
- What if I lose my FEIN? You can contact the IRS to request a copy of your FEIN confirmation letter.
- Do I need a FEIN for a sole proprietorship? While not always legally required, it’s highly recommended for opening a business bank account and separating personal and business finances.
Conclusion
Obtaining a FEIN is a crucial step in establishing a legitimate and well-organized business. It’s essential for opening a business bank account, managing your finances, and complying with IRS regulations. The process is straightforward, free, and can be completed quickly online. With your FEIN in hand and your business bank account set up, you’ll be well-positioned to manage your finances effectively and grow your business.
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