If you are growing your business from a hobby or a small side gig, there will come a point in time when you need to get yourself set up as a legitimate business– to get a bank account, establish accounts with distributors, and file and pay taxes. In order to do any of this, you’ll need a federal tax ID, also known as an Employer Identification Number (EIN).
Luckily, it’s a pretty easy task. And it’s free, although there are people out there who will charge you for it if you’re gullible. The IRS has several ways to apply, but the easiest one is online.
There are a few things you need to know before you fill out the application, like the legal structure of your business– sole proprietorship, LLC, partnership or corporation– and the reason why you are applying for the Tax ID, which could be starting a new business, establishing a new bank account, hiring employees, and a few other choices. Then you enter your name, address, and social security number or ITN and submit. If you apply online you’ll get your EIN immediately.
If, for some reason, you prefer to wait a whole lot longer, you can submit an application by mail or fax. It takes about a week to get your EIN if you apply by fax and 4-5 weeks if you apply by mail. I’m not sure if a carrier pigeon option is also available.
After you get your EIN you may still need to get a state tax ID if you need to pay state taxes. The procedures for that vary by state and I’ll cover it in an upcoming post.