By Joshua D. Freeman
When you start a business, one of the first things you will need is an Employer Identification Number (EIN). An EIN will make sure that the federal government can tax you immediately to prevent any future headaches with the IRS. The quickest and easiest way to request an EIN is through the IRS website’s online portal.
In true IRS fashion, access to the EIN website is restricted to certain hours of operation. Why? I have no idea, but if you are a night owl or live overseas make sure that you log in between 7:00 AM to 10:00 PM Eastern Time.
To avoid frustration with the IRS, you will need your social security number or EIN of a parent company to request a new EIN. However, you can only use a social security number once per day. If you need to request more than one EIN, make sure that you have time the next day or ask a partner in the business for their social security number.
When you are prepared to request an EIN, go ahead and visit IRS.gov/ and enter “EIN” in the search box. The search will lead you to the EIN Assistant web portal.
The first task when requesting an EIN through the web portal is to make sure that the name of the business that you give the IRS is the same as the name you give the state where you file. The IRS doesn’t let you use any commas or other punctuation, so if you have any punctuation in the name of your entity, you will have to leave that out. Having punctuation in a business name isn’t a problem but is also a reason that some people prefer not to use punctuation in the name of their entities.
First-time filers are often confused by the taxation questions for an LLC in the EIN filing process. There are two default taxation statuses for LLCs. The first is that the LLC will be taxed as a disregarded entity if there is only one owner, or as a partnership if it has multiple owners. So if you want to be taxed as a corporation or want to make an s-selection, you will need to file a separate form.
Keep in mind that once you have an EIN, you may need to make a change down the road if you change the nature of your business. This includes changing from one entity type to another, such as changing from a partnership to a corporation, or from a corporation to a sole proprietorship. Remember that when you change your entity structure, you need to change the way you are taxed. This change is even required when you form an LLC as a disregarded entity and then add partners to be taxed as a partnership.
In any of these situations, it is critical to have reliable legal and tax advice.