Which is needed first: Employer ID Number or Incorporation?

If you are an entrepreneur or foreign investor who is starting a new business, there are two critical tasks waiting for you: incorporation of your business and obtaining an Employer ID Number which is called an EIN.

What is an Incorporation? #

Incorporation is a legal process for each business owner must go through. After going through this legal process, you will have your business structure. Such business structures may include a Limited Liability Company (LLC), S corporation, C corporation, non-profit and cooperative.

There are some steps to be taken in order to incorporate your business. These steps are as follows respectively: filing Articles of Incorporation, describing bylaws and paying registration or other fees depending on where you are incorporating.

What is an Employer ID Number? #

An EIN – also called an Employer Identification Number or Federal Employer Identification Number (FEIN) – is a nine-digit tax identification number required for U.S. businesses for tax and reporting purposes. You may imagine that EINs are like social security numbers (SSN) for your business.

A business needs an EIN in order to hire employees, opening a bank account, complying with taxes. Once you get your EIN, it will be unique to your business assigned by the Internal Revenue Service (IRS) and they never expire. An EIN is required for several reasons:

  • Applying for a Business License
  • Tax Filing and Reporting
  • Opening a business bank account

Which is first to be done: Employer ID Number or Incorporation? #

Incorporation is required for all businesses before applying for an Employer ID Number. Getting an EIN for your LLC after the state approves your LLC is the best way. This is because you want to ensure your LLC name is accepted before “attaching” an EIN to it.

employer id number or incorporate

Apart from this, during the EIN online application on the IRS’s website, entering your business information such as “date of formation” is required. So, this information will naturally be verified after your LLC has been established.

The fact of the matter is that you may also obtain your EIN before incorporation. However, if your business name gets rejected by the IRS, you will need to re-file with a different name. In this case, your first EIN will be attached to the wrong business name.

How Do You Apply For an Employer ID Number? #

To obtain an Employer Identification Number (EIN), filling out Form SS-4 is required. It is a one-page long-form and essential during filing your EIN application. The required information asked in the Form SS-4 includes:

  • The legal name of entity or individual
  • Trade name of the business
  • Executor, administrator, trustee, “care of” name
  • Mailing address
  • Name of the responsible party
  • Whether this is an application for an LLC
  • Number of LLC members
  • Whether LLC was organized in the United States
  • Type of entity: sole proprietorship, corporation, personal service corporation, church or church-controlled organization, other nonprofit organizations, estate, etc.
  • Name of state or foreign country of incorporation
  • Reason for applying
  • Date business started
  • Closing month of the accounting year
  • The highest number of employees
  • Indicate if you expect your employment tax to be $1,000 or less in a full calendar – year and want to file Form 944 annually instead of Forms 941 quarterly
  • First date wages or annuities paid
  • The principal activity of the business
  • The principal line of merchandise sold, specific construction work done, products produced, services provided
  • Whether the applicant has ever received an EIN
  • Third-party designee information
  • Signature

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