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What to Know About Employer ID Numbers

 

In general, businesses need an EIN. There are various ways to apply for one, but the IRS is happy to let you know that you may now apply online. It's a free service.

You are urged to check your state to discover whether you need a state number or charter. The online federal EIN application is in a question-and-answer format, with embedded help topics and hyperlinked keywords and definitions.

Once all validations are done, you'll get your EIN immediately. You can download, save and print your confirmation notice — a fast, free and user-friendly way to get your EIN.

But let's take a step back. It's best to be sure your organization is formed legally before you apply for an EIN. When you apply for an EIN, it is presumed that you're legally formed. The clock starts running on the three-year period.

If you're a sole proprietor, you will need a new EIN when there's a change of ownership or structure, but not for a name change, a change in location or if you add other locations, or if you operate multiple businesses. You're required to obtain a new EIN as a sole proprietor if:

  • You're subject to a bankruptcy proceeding.
  • You incorporate.
  • You take in partners or operate as a partnership.
  • You purchase or inherit an existing business that you operate as a sole proprietorship.

If you incorporate, you'll need to obtain a new EIN if:

  • Your corporation receives a new charter from the secretary of state.
  • You are a subsidiary of a corporation using the parent's EIN or you become a subsidiary of a corporation.
  • You change to a partnership or a sole proprietorship.
  • A new corporation is created after a statutory merger.

You won't need a new EIN as a corporation if:

  • You're a division of a corporation.
  • The surviving corporation uses the existing EIN after a corporate merger.
  • Your corporation declares bankruptcy.
  • Your corporate name or location changes.
  • You choose to be taxed as an S corporation.
  • Reorganization of your corporation changes only the identity or place.
  • Conversion occurs at a state level, but your business structure remains unchanged.

If your company is a partnership, you'll need a new EIN if:

  • You incorporate.
  • Your partnership is taken over by one of the partners and is operated as a sole proprietorship.
  • You end an old partnership and begin a new one.

You won't need a new EIN as a partnership if:

  • Your partnership declares bankruptcy.
  • The partnership name changes.
  • You change the location of the partnership or add locations.
  • A new partnership is formed as a result of the termination of a partnership under IRC Section 708(b)(1)(B).
  • Fifty percent or more of the ownership of the partnership (measured by interests in capital and profits) changes hands within a 12-month period (terminated partnerships under Reg. 301.6109-1).

And if you've lost or misplaced your EIN and want to verify it, you can visit the online EIN site for instructions. The IRS is limiting EIN issuance to one per responsible party per day. The responsible party is the person who has a level of control over, or entitlement to, the funds or assets in the entity that, as a practical matter, enables the individual, directly or indirectly, to control, manage or direct the entity and the disposition of its funds and assets.

When you apply for an EIN with the IRS assistance tool, your nine-digit federal tax ID becomes available immediately upon verification.

 

 
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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