What is a FEIN? Your Guide to Employer Identification Numbers

Starting and running a business involves a lot of paperwork and acronyms. One of the most important acronyms you’ll encounter, especially if you plan to hire employees or operate as a corporation or partnership, is FEIN. But what exactly is a FEIN? This comprehensive guide breaks down everything you need to know about Employer Identification Numbers.

What is a FEIN?

FEIN stands for Federal Employer Identification Number. It’s a unique nine-digit number assigned by the Internal Revenue Service (IRS) to business entities operating in the United States. Think of it as a Social Security Number for your business. Just like an individual uses their SSN to identify themselves for tax purposes, businesses use their FEIN to identify themselves to the IRS.

Why Do You Need a FEIN?

While not every business needs a FEIN, certain circumstances mandate it. The most common reasons for needing a FEIN include:

Hiring Employees: This is the most frequent reason businesses obtain a FEIN. If you plan to hire even one employee, you’ll need a FEIN to report payroll taxes and comply with employment laws.

Operating as a Corporation or Partnership: Corporations (including S corporations) and partnerships are required to have a FEIN, regardless of whether they have employees. This distinguishes them as separate legal entities from their owners.

Operating as a Limited Liability Company (LLC): While single-member LLCs can sometimes use the owner’s Social Security Number for tax purposes, they’ll typically need a FEIN if they have employees or elect to be taxed as a corporation. Multi-member LLCs always require a FEIN.

Operating as a Trust or Estate: Trusts and estates that conduct business activities typically need a FEIN.

Operating as a Non-Profit Organization: Tax-exempt organizations, like charities and foundations, need a FEIN to apply for and maintain their tax-exempt status.

Opening a Business Bank Account: Many banks require a FEIN to open a business bank account. This helps the bank comply with regulations and ensures proper reporting of financial transactions.

Applying for Business Licenses and Permits: Some states and local governments require a FEIN as part of the business licensing and permitting process.

Paying Excise Taxes: If your business is subject to excise taxes (e.g., taxes on alcohol, tobacco, or firearms), you’ll need a FEIN to report and pay those taxes.

How to Apply for a FEIN

The process of applying for a FEIN is surprisingly straightforward and, best of all, free! You can apply online through the IRS website. Here’s a general overview of the steps:

Determine Eligibility: Ensure your business meets the criteria for needing a FEIN.

Gather Required Information: You’ll need information about your business, including its legal name, address, type of business (e.g., corporation, partnership, LLC), and the name and Social Security Number of the responsible party (the individual who controls, manages, or directs the entity and the disposition of its funds and assets).

Complete the Online Application (Form SS-4): The IRS’s online FEIN application is essentially an electronic version of Form SS-4, Application for Employer Identification Number. Carefully fill out all required fields.

Submit the Application: Once you’ve reviewed the information for accuracy, submit the application electronically.

Receive Your FEIN: In most cases, you’ll receive your FEIN immediately upon successful submission of the online application. You can then download and print your official FEIN confirmation letter (Notice CP 575).

You can also apply for a FEIN by mail or fax, but the online method is generally the fastest and most efficient.

What Information Do I Need to Apply for a FEIN?

Legal Name of the Business: This is the official name registered with the state (if applicable).

Business Address: This is the primary location of your business.

Type of Business Entity: Select the appropriate legal structure (e.g., sole proprietorship, partnership, corporation, LLC).

Reason for Applying: Indicate why you need a FEIN (e.g., starting a new business, hiring employees, changing the type of organization).

Responsible Party Information: Provide the name, Social Security Number, and title of the individual who controls the business.

Where to Use Your FEIN

Once you have your FEIN, you’ll need to use it on various business-related documents and interactions, including:

Tax Returns: Include your FEIN on all federal tax returns filed for your business.

Payroll Tax Deposits: Use your FEIN when making payroll tax deposits with the IRS.

Business Bank Accounts: Provide your FEIN when opening a business bank account.

Credit Applications: Include your FEIN on credit applications for business loans, lines of credit, or business credit cards.

Applications for Licenses and Permits: Use your FEIN on applications for business licenses and permits at the state and local levels.

Contracts and Agreements: Include your FEIN on contracts and agreements with vendors, suppliers, and customers.

payment processing: Payment processors require your FEIN for proper setup. Companies like https://paymentcloudinc.com, Authorize.net and many others need this information to verify your business.

FAQS

Is a FEIN the same as a Tax ID? Yes, FEIN and Tax ID are often used interchangeably. They both refer to the Employer Identification Number assigned by the IRS.

How much does it cost to get a FEIN? Applying for a FEIN is free through the IRS website.

How long does it take to get a FEIN? Applying online usually results in immediate issuance of your FEIN.

Can I get a FEIN for a sole proprietorship? Yes, while a sole proprietorship can often use the owner’s Social Security Number for tax purposes, a FEIN may be required if you hire employees or choose to operate under a different name (DBA).

Can I change my FEIN? Generally, you cannot change your FEIN. If your business undergoes significant changes, such as a change in ownership or legal structure, you may need to apply for a new FEIN.

What if I lose my FEIN? You can request a copy of your FEIN confirmation letter (Notice CP 575) from the IRS. You may need to provide information to verify your identity and business details.

Conclusion

Understanding what a FEIN is and when you need one is crucial for running a legally compliant and successful business. The FEIN serves as your business’s unique identifier with the IRS, facilitating various financial and administrative processes. By following the steps outlined in this guide, you can easily obtain your FEIN and use it effectively.

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