This week in the Freedom Friday blog and email newsletter, we're continuing the series 10 Steps to Take Your Small Business to the Next Level in 2023, and this week we're discussing the fourth step to take your small business to the next level, which is to apply for an EIN. What is an EIN? An EIN is a federal Employment Identification Number, which is issued by the Internal Revenue Service (IRS). If you plan to open a bank account for your small business, your bank will require your business to have an EIN, which is basically the social security number for your small business. Your EIN might also be required to apply for licenses and permits, filing tax returns, and if you plan to hire employees. Applying for an EIN is free, and it's a simple to apply with the IRS. So, here are three (3) easy steps to apply for an EIN:
The IRS requires you to provide some basic information about your business as part of the online application process. You will need to provide a physical business address; the name of your principal officer, manager, and/or owner, along with his or her social security number; if an LLC, the number of members; the type of business and primary activity; the date you started or acquired the business; the closing month of the accounting year, e.g. December; the number of employees you expect to hire, if any; and the applicant's contact information.
Visit the IRS Website
The fastest way to apply for an EIN is to visit the IRS website between the hours of 7am and 10pm EST, Monday through Friday. The online application process takes about five minutes, and the IRS instantly issues the EIN letter with your EIN number. If you can't apply online, you can also mail or fax the SS-4 application form.
Look Out for Issues
In recent years, the IRS has made some changes regarding who can apply for an EIN. All EIN applications (online, mail, or fax) must disclose the name and taxpayer identification number (SSN, ITIN, or EIN) of the true principal officer, general partner, grantor, owner, or trustor. This individual or entity, which the IRS calls the “responsible party,” controls, manages, or directs the applicant entity and the disposition of its funds and assets. Unless the applicant is a governmental entity, the responsible party must be an individual, i.e., a natural person, and not a business entity. If there is more than one responsible party, the entity can identify whichever party the entity wants the IRS to recognize as the responsible party.
Thinking about starting a small business? Or maybe your small business is having issues with contracts, leases, business partners, collection issues, or experiencing other barriers to growth? Please contact me at [email protected] to schedule a FREE strategy session.
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