What an EIN is and Why You Need One for Your Business
By Lane V. Erickson, Idaho Business Attorney
Creating a new business can be complicated and time-consuming, especially if you’ve never done it before. Because there are so many things that go into creating a new business, and making sure that it is done correctly, we always suggest that a person use a qualified and experienced business attorney to help them through the process.
The attorneys on our premier Idaho business law team at Racine Olson include partners Lane Erickson and TJ Budge, and attorneys Nate Palmer and Dave Bagley. Each of the attorneys on our team is skilled, knowledgeable, and experienced in assisting our clients with all their business needs including creating and operating their business. We have the ability to help you move your business forward by guiding you through and helping you with any of your business issues.
If you have considered starting a new business, or actually have done it, we encourage you to contact us for a free 30-minute consultation where we can answer your business related questions and provide you with information that will be helpful for you and your business. Our goal is to help each of our clients be successful in their business operations.
We also help our clients make sure they are in compliance with all applicable federal and state legal requirements. We want our clients to have peace of mind that everything is done correctly, so they can focus their time and energy on moving their business forward, so it is successful.What It is
When we help our clients create a new business, one of the things we accomplish for them is applying for and receiving an EIN. EIN is an acronym for the words employee identification number. Some people also call this the business’ Tax ID Number. If you hear those terms, they essentially mean the same thing.
When most new businesses are created as an entity, such as an LLC, a PLLC or a corporation, they are considered by law to be a separate legal person. Because of this, there has to be a way to separate the business and make it distinct from the individuals who own it. One of the ways this is accomplished is by getting an EIN from the IRS.
The easiest way to describe this is that an EIN is like a social security number for the new business. It is a unique number that is generated by the IRS and is given to a specific business. No other business will ever have that same number.How You Get One
An EIN is generated and provided by the federal Internal Revenue Service. This is accomplished when form SS - 4 is completed and delivered to the IRS who then uses that information to register the new entity and to associate it with a unique EIN.
It used to be that this process required the SS - 4 form to be filled out by hand and then mailed to the IRS. The IRS will then process the paperwork and mail back a letter that would identify what the EIN is that has been registered with that business entity. However, the process is much easier now than it has ever been.
Today, the IRS allows the SS -4 application form to be filled out and filed online. Because of this, once it is complete, the official EIN letter can be automatically generated by the IRS and delivered instantly to the individual who is completing the application.Bank Accounts
Because an EIN is like a social security number, when you create a new business and you want to open bank accounts, you are required to have an EIN in order for the bank to create the account for your business. Otherwise, all these business accounts will be associated with your own personal social security number which means they are not separated and owned by the business itself.
Additionally, one are the most important corporate formalities that exists once a business is created is that it be separated from the individuals who own it. In other words, it’s important that all bank accounts of the individuals be separated from the bank accounts of the business. This will help avoid commingling of monies.
If the money of the business and the individual owners are commingled, and the business itself is sued by a third-party, that third-party can then pierce the corporate veil that normally protects the owners and go after the owners individually for any liabilities that exist. In other words, one of the main reasons for having a corporation in the first place which is to protect the owners, no longer exists.Taxes
Additionally, the EIN is used to identify the business in all state and federal tax filings that are done every year. In fact, when the IRS issues the EIN letter, this letter provides specific instructions about the federal tax forms the business entity is required to file every year and the date when they are due.
The letter also provides additional information about tax related issues that the business owner can then discuss with their financial advisor or accountant. By doing this, the business owner can take advantage of the very best tax options that exist.
If you have questions about whether your business entity needs an EIN, we can help. We have assisted numerous clients in the creation of their business entities, including obtaining an EIN from the IRS, and we are confident that we can help you too. Please contact us today for a free 30-minute consultation where we can answer your questions and help you with your specific business needs.Enlist an Idaho Business Attorney to Help You
Our team of Idaho business lawyers can help you with any of your business structure or operation needs. Whether you are seeking to create a new business or review a current business, we are available to discuss your options and answer your questions at an initial free 30-minute consultation. Call us toll free at 877.232.6101 or 208.232.6101 for a free consultation. You can also email us directly at firstname.lastname@example.org or stop by our office at 201 East Center Street, Pocatello, Idaho 83201. We will answer your questions and help you solve your Idaho business problems.