Getting an FEIN: A Step-by-Step Guide for Business Owners
Starting a business is an exciting and challenging journey. Among the many tasks you’ll encounter, obtaining a Federal Employer Identification Number (FEIN), also known as an Employer Identification Number (EIN), is a crucial step for most businesses. This unique nine-digit number, assigned by the Internal Revenue Service (IRS), acts as your business’s social security number and is essential for various operational functions.
This guide provides a comprehensive step-by-step approach to obtaining an FEIN, along with an FAQ section to address common questions and concerns.
Why Do You Need an FEIN?
An FEIN is required for businesses that:
- Hire employees: You need it to report payroll taxes.
- Operate as a corporation, partnership, or LLC: These business structures are generally required to have an FEIN, even if they don’t have employees.
- Operate as a sole proprietorship or single-member LLC and need to open a business bank account or file excise taxes: Many banks require an FEIN to open a business account, and some sole proprietorships are subject to excise taxes.
- Withhold taxes on income, other than wages, paid to a non-resident alien.
- Operate a Keogh or qualified retirement plan.
- Are involved with certain types of trusts, estates, real estate mortgage investment conduits, nonprofit organizations, or farmers’ cooperatives.
Even if your business doesn’t strictly require an FEIN, obtaining one can be advantageous for various reasons, including separating your personal and business finances, building business credit, and streamlining administrative processes.
Step-by-Step Guide to Obtaining Your FEIN:
The process of applying for an FEIN is straightforward and can usually be completed online in a matter of minutes. Here’s a detailed guide:
1. Determine Your Eligibility:
Before you begin the application, ensure that your business is eligible for an FEIN. Generally, any legal business entity operating in the United States or U.S. territories can apply.
2. Choose Your Business Structure:
The IRS requires you to identify your business structure during the application process. Common structures include:
- Sole Proprietorship: A business owned and run by one person, where there is no legal distinction between the owner and the business.
- Partnership: A business owned and operated by two or more individuals.
- Limited Liability Company (LLC): A business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.
- Corporation (S-Corp or C-Corp): A legal entity separate from its owners, offering limited liability protection.
Choosing the right business structure is crucial for legal and tax implications. Consulting with a legal or financial professional is advisable.
3. Gather Necessary Information:
You’ll need the following information to complete the FEIN application:
- Legal Name of Your Business: This should match the name under which you’re operating.
- Trade Name (if applicable): Also known as a “doing business as” (DBA) name.
- Principal Business Activity: A brief description of what your business does.
- Mailing Address: Your business’s official mailing address.
- Responsible Party Information: The name, title, and social security number (SSN) of the individual who controls, manages, or directs the entity and the disposition of its funds and assets. This person must be an individual (not an entity).
- State of Incorporation/Formation (if applicable): If you’re operating as a corporation or LLC, you’ll need to specify the state where it was formed.
- Reason for Applying: Indicate why you need an FEIN (e.g., starting a new business, hiring employees, changing business structure).
4. Apply Online via the IRS Website:
The most convenient and fastest way to obtain an FEIN is through the IRS website.
- Go to the IRS website: www.irs.gov.
- Search for “Apply for an EIN Online.”
- Follow the on-screen instructions. The application is an interactive process, and you’ll be prompted to provide the information you gathered in Step 3.
- Ensure all information is accurate and complete before submitting the application.
5. Obtain Your FEIN:
Once your application is submitted, the IRS will typically issue your FEIN immediately. You can download, save, and print your FEIN confirmation notice (Letter 147C) for your records.
Alternative Application Methods:
While the online method is the fastest, you can also apply for an FEIN via:
- Fax: Complete Form SS-4 and fax it to the appropriate IRS fax number based on your location.
- Mail: Complete Form SS-4 and mail it to the appropriate IRS address based on your location.
Fax and mail applications take significantly longer than online applications.
FAQs:
- How much does it cost to get an FEIN? Obtaining an FEIN from the IRS is free. Beware of third-party services that charge a fee for this service.
- How long does it take to get an FEIN? Applying online generally results in immediate FEIN assignment. Fax and mail applications can take several weeks.
- Can I apply for an FEIN if I’m not a U.S. citizen? Yes, you can apply for an FEIN even if you’re not a U.S. citizen or resident. However, the “responsible party” listed on the application typically needs a Social Security number (SSN) or Individual Taxpayer Identification Number (ITIN).
- What if I made a mistake on my FEIN application? Contact the IRS immediately to correct any errors. The process for correcting errors varies depending on the type of error and when it was made.
- Do I need a new FEIN if I change my business name? Generally, you do not need a new FEIN if you only change your business name. However, you may need to notify the IRS of the name change.
- Do I need a new FEIN if I change my business location? No, you do not need a new FEIN if you only change your business location. You do need to notify the IRS of the change of address.
Once you have your FEIN, you’ll need to set up merchant processing to accept card payments. Consider Authorize.Net for a secure and reliable payment gateway to integrate with your website or payment system.
Conclusion:
Obtaining an FEIN is a relatively simple but essential step in establishing your business. By following the steps outlined in this guide, you can easily obtain your FEIN and ensure your business is compliant with IRS regulations.
Once you’ve secured your FEIN, the next vital step is establishing merchant processing to accept credit and debit card payments from your customers. Choosing the right merchant processing solution is crucial for your business’s success.
For a seamless and reliable merchant processing experience tailored to your specific business needs, we highly recommend contacting Payminate.com. They offer competitive rates, secure payment processing, and exceptional customer support to help your business thrive. They can guide you through the complexities of payment processing and ensure you have the tools you need to succeed in today’s competitive marketplace.