Starting and operating a business involves a lot of paperwork and small details. Among these is ensuring that your business is legal and proper in the eyes of the government. This means that you will need to set up a system for filing your taxes. While most businesses need an IRS-EIN-Tax-ID, sole proprietorships are a bit different. Here is what you need to know about getting a federal Tax Id for sole proprietorship:
What Is An IRS-EIN-Tax-ID?:
An EIN, or employer identification number, acts a bit like a social security number for your business. While most people associate an EIN with taxes, it can also be used to open lines of credit and even a separate bank account for your new company.
When Does A Sole Proprietorships Need An EIN?:
With some sole proprietorships the owner’s social security, or SSN number, can function as the federal Tax Id number. You will not need to file for a separate EIN if your business is a sole proprietorship that has no employees and does not file for excise tax returns or pension. If you do have employees, file excise tax returns or file for pension, you will still need to obtain a separate EIN for your business.
How To Get An EIN:
To obtain an EIN you need to complete and submit the appropriate federal forms. Approval of the forms can take some time, which is why most modern business owners opt for completing their EIN online through a trusted site. You also have the option of mailing or faxing the required forms. However, sending the forms in yourself can increase the wait time from days to several weeks.
If you are starting a sole proprietorship, you should consider the current and future needs of your business. If you plan on hiring employees, it is best to get an EIN as soon as possible.