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Employer Identification Number (EIN)




Employer Identification Numbers (EIN) Explained

The employer identification number is the method by which businesses transmit tax information to the State and Federal Governments. The FEIN is issued by the Internal Revenue Service (IRS). Your State’s Department of Revenue may use the same number (State EIN) or issue a similar identification number.

A Little More or Employer Identification Numbers

The Employer Identification Number (EIN) is used to identify the business entity or employer in the country. You can think of it as a Social Security Number (SSN) (which is issued to check the identity of residents of USA) but for businesses. The Federal EIN is issued by Internal Revenue Service (IRS) which is nine digit unique codes and it reflects where does the employer or business entity exist and register.

Businesses generally obtain an EIN at the time of filing for business entity status in the state. They either visit the IRS website or call or fax the IRS. If you want to change your business entity status, you must petition for a new EIN. The individuals will reach out to the state taxing authority to acquire a state EIN once the Federal EIN is issued.
An Employer Identification Number is required for all forms of business including sole proprietorship, partnership, private companies, trust and public ltd companies. A sole proprietorship without employees may file taxes under the business owner’s social security number. The EIN becomes mandatory when the business acquires employees and is required to withhold payroll taxes on those individuals.

Without an EIN, the business cannot legally pay (or without payroll taxes) their employees, nor can they file income tax returns. Furthermore, a business without an EIN cannot open an account with bank or brokerage house.

Note: Obtaining a business EIN is also important for Establishing Business Credit.

References for Employer Identification Number

https://www.investopedia.com/terms/e/employer-identification-number.asp
https://www.irs.gov/businesses/small-businesses-self…/employer-id-numbers
https://investinganswers.com/financial…/employer-identification-number-ein-5967

 

Note: Obtaining a business EIN is also important for Establishing Business Credit.


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