We know there are several benefits to getting an EIN, so you may be asking yourself whether you need to have a registered business to get one. Here’s everything you need to know about getting an EIN, even if you don’t have an officially registered business.
Do you need to be registered as a business to obtain an EIN?
The short answer is no, your business does not need to be legally registered to obtain an EIN. As per the rules implemented by the IRS, you can still apply for an EIN at any time. You’ll only need to legally register once you reach a particular stage in your business organization. But, we’ll get to that in a bit.
For example, you can do business as a sole proprietor and have an EIN to manage banking, and financial reports, and add credibility to your business. But you won’t have to register your business with the secretary of state’s office first.
Sole proprietorship EINs
Although it’s not necessary to apply for an EIN as a sole proprietor, many choose to have one as it creates room for a lot more benefits than doing business through your Social Security Number. Sole proprietorships are able to apply for and obtain an EIN for their business.
Having an EIN is a great way to manage your business finances, and keep them separate from your personal dealings. EINs also add another layer of security, making it harder for fraudsters to commit identity theft. You can always verify your identity using your EIN if your SSN is compromised.
If your business expands, you will also need an EIN before you start taking on employees. You will need an EIN before you can register a business and bring on paid staff. A sole proprietorship is, therefore, an example of a circumstance under which you will not be required to have a registered business before obtaining an EIN.
When business registration may be necessary
Of course, there are also situations in which you will need to be registered as a business. You can obtain an EIN before registering as an LLC or corporation. In fact, you need an EIN before you can officially register your business or incorporate it.
Legal Entity Formation
Depending on the type of company you run, you may need to legally register your business. The following business structures need to be formally registered:
- Limited Liability Companies (LLCs): LLCs are a type of business structure that provides limited liability protection for the owners (called “members”). To form an LLC with multiple employees, you must register with the Secretary of State or equivalent agency in the state where the business will operate.
Before you register your LLC with more than one employee, you need to have an EIN. Upon EIN application, you need to declare the intended structure of your company (LLC). When you legally register, you’ll also have to provide you have the right structures in place to be called an LLC.
- Corporations: Different types of corporations, such as C-Corps and S-Corps, have different tax implications. Again, you will need to register with the state authorities necessary in accordance with the business’s address. However, you can apply and obtain an EIN before your corporation is legally registered as this will help the IRS identify you.
State-Specific Requirements
Different company structures may also be subject to registering under state-specific requirements. The categories of these requirements are as follows:
- Filing for Taxes: Depending on your business structure and location, you may need to register for federal, state, or local taxes. This can include income tax, sales tax, and payroll tax.
- Obtaining Necessary Insurance: Depending on your industry and location, you may need to obtain specific types of insurance, such as liability or workers’ compensation insurance.
- Complying with State Requirements: Each state has its own set of requirements that businesses must adhere to. This can include maintaining a registered agent, filing annual reports, and complying with other state-specific regulations. These mainly have to do with the nature of your business.
It is good to be aware that there are subtle differences in states in terms of their laws, licensing and tax intervals before you register your company. Your chosen company structure may influence these depending on where your business is located.
Exempt Organizations
Tax-exempt organizations need to take a different route. Having a tax-exempt organization actually requires you to register with the IRS before you apply for an EIN. This is because you will need to be assessed before filing for tax return status, and your EIN will need to be flagged accordingly.
How to obtain an EIN without business registration
Here is a step-by-step guide you can follow on how you or your businesses can apply for an EIN without formal business registration.
- Determine if you need an EIN: An EIN is required if your business has employees, operates as a corporation or partnership, or needs to file certain tax returns. Even if your business is a sole proprietorship with no employees, you may still want to obtain an EIN to keep your personal and business finances separate.
- Gather the required information: You will need to provide your business name and physical address. You’ll also need to state the type of legal structure for your business (sole proprietorship, LLC, corporation, etc.). You can only register for an EIN if you have either a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) if you are a foreign person without an SSN, so ensure you have this information too.
- Apply for the EIN: If you have an ITIN or SSN, you can apply for the EIN online through the IRS website. If you do not have an SSN or ITIN, you will need to apply for the EIN by phone, fax, or mail using IRS Form SS-4. Web applications only take around 30 minutes, and are essentially a questionnaire that asks for identifying aspects of your business.
- Receive and Verify the EIN: Once your application is processed, the IRS will assign you an EIN immediately if applying online. Once you receive it, it will take a bit of time to register on the IRS system – usually 2 – 3 weeks. Make sure to keep the EIN in a safe place, as it is your business’s federal tax identification number which may be essential for filing tax.
Summary
In most cases, you do not need to be legally registered to apply for an EIN. The only time formal registration is required is if you run a tax-exempt organization. If you need help or advice on formally registering your business, a professional will be able to help you through the process.