Do I need an EIN?
Tuesday, 6 September 2016
by Staff, Spaulding Law
When a person is looking to start a business they have several things to consider. Whether or not to apply for an EIN is one of those crucial decisions. EIN stands for Employer Identification Number and is like a social security number that the IRS provides for a business. EINs are highly recommend for businesses because they add a level of privacy to personal information. An owner can list the EIN number on business related documents instead of their personal social security number. This limits the exposure of personal social security numbers and can reduce the risk of personal identity theft. For example, if your business acts as an independent contractor, you can provide the EIN to contracting companies for 1099 purposes instead of your social security number.
It should be noted that in addition to privacy, an EIN may be required for basic business functions. An EIN is often required if you wish to open a bank account, apply for credit cards, apply for business permits, or provide 1099s to independent contractors in the name of the business. There are also some circumstances where you will be required to have an EIN by the IRS. The IRS will require you to have an EIN:
• If a business has employees.
• When a business has multiple owners (i.e. operates as a multi-member LLC or partnership).
• When the business files tax returns for Employment, Excise, or Alcohol, Tobacco and Firearms.
• When the business withholds taxes on income, other than wages paid to a non-resident alien.
• When the business has a Keogh plan (tax deferred pension plan for self-employed individuals).
• When the business is involved in any of the following organizations: Corporations, Trusts (except certain grantor-owned revocable trusts), IRAs, Exempt Organization Business Income Tax Returns, Estates, Real estate mortgage investment conduits, Non-profit organizations, Farmers’ cooperatives, and Plan administrators.
An attorney can usually obtain an EIN with very minimal effort and cost to the client. Even if it is not technically required, having an EIN is almost always a good idea.
This information is made available by Spaulding Law for educational purposes only and not to provide legal advice. By using this website, you understand that there is no attorney-client relationship between you and Spaulding Law, unless you have entered into a separate representation agreement. This information should not be used as a substitute for competent legal advice from a licensed professional attorney.
It should be noted that in addition to privacy, an EIN may be required for basic business functions. An EIN is often required if you wish to open a bank account, apply for credit cards, apply for business permits, or provide 1099s to independent contractors in the name of the business. There are also some circumstances where you will be required to have an EIN by the IRS. The IRS will require you to have an EIN:
• If a business has employees.
• When a business has multiple owners (i.e. operates as a multi-member LLC or partnership).
• When the business files tax returns for Employment, Excise, or Alcohol, Tobacco and Firearms.
• When the business withholds taxes on income, other than wages paid to a non-resident alien.
• When the business has a Keogh plan (tax deferred pension plan for self-employed individuals).
• When the business is involved in any of the following organizations: Corporations, Trusts (except certain grantor-owned revocable trusts), IRAs, Exempt Organization Business Income Tax Returns, Estates, Real estate mortgage investment conduits, Non-profit organizations, Farmers’ cooperatives, and Plan administrators.
An attorney can usually obtain an EIN with very minimal effort and cost to the client. Even if it is not technically required, having an EIN is almost always a good idea.
This information is made available by Spaulding Law for educational purposes only and not to provide legal advice. By using this website, you understand that there is no attorney-client relationship between you and Spaulding Law, unless you have entered into a separate representation agreement. This information should not be used as a substitute for competent legal advice from a licensed professional attorney.
