Running one’s own business is an exciting venture, but one of the challenges many entrepreneurs face is how to obtain financing to expand upon the dream. This is true for startups or for business owners seeking to grow their companies. Loans are often needed to help purchase equipment and supplies, cover payroll, open new locations, or expand upon a current facility.

It’s common for business owners to feel overwhelmed as they begin to secure financing, as the process can be a lot of work and intensive. Those who proactively invest time in understanding the complexities associated with the process, are likely to have a smoother and quicker experience. Here we’ll take a look at the basic steps you should take when you initiate the loan process.

Tips before you pursue a loan

Before you take the first steps required to apply for a loan, here are a few tips you should consider keeping in mind.

● Determine what business needs or projects you’ll utilize the extra money to finance

● Write a well-thought-out business plan to flesh out your business needs or projects to show lenders

● Explore different small business loan opportunities and understand the different types of financing available

● Familiarize yourself with and keep a close pulse on current interest rates

● Check your business’s credit score and history (check your personal credit standing as well)

● If you haven’t done so already, separate your personal and business accounts

● Factor in your ability to commit to a repayment plan alongside your business needs

Choose the right type of small business loan to apply for

Businesses can obtain loans in several ways, including banks, credit unions, and online lenders. Before applying for a loan, it’s helpful to first calculate your financial needs, determine how much you can afford to borrow, and learn about the different loan options.

Loans are definitely not a one-size-fits-all option. You’ll find diversity in loan types and interest rates. In the final quarter of 2023, the average loan rate ranged from 5.89% to 12.23%, so the rate is one of the factors you should weigh into your decision, along with whether you’ll qualify for specific loans. Common types of loans available to small businesses include:

Small Business Administration (SBA) loans

The SBA offers several loan options to small businesses ranging from $500 to $5 million. The primary types of loans the SBA offers include:

● 7 (a) loan program

● Microloan program

● CDC/504 loan program

● Disaster loans

To qualify, small business owners must meet certain requirements, which will vary depending on the type of loan sought.

Traditional loans

Not all business owners will find SBA loans as their best option, or they may not qualify. If you fall into this category, you might find pursuing a traditional business loan to be appealing. Popular traditional loan options include:

● Line of credit financing

● Term loans

● Secured loans

● Unsecured loans

● Equipment loan financing

● Working capital loan

● Invoice factoring

● Merchant cash advance

Depending upon your needs, obtaining a business credit card may also be a way you can utilize it to fund your business ventures. In most cases, this isn’t the best option, but does make sense, depending on how much cash the business needs.

Alternative lenders

For business owners who find it difficult to secure SBA or traditional loans, alternative lenders are sometimes a viable option. Interest rates are usually higher, but if the return on the investment is strong for the project the money is spent on, it might be worth the trade-off of a higher interest rate.

Evaluate lenders based on your business loan type

Once you finish exploring your loan options, you’ll want to compare and contrast lenders based on the loan type. To evaluate your loan options, consider the following.

● Check a lender’s minimum requirements to qualify for their loan(s), such as your credit score, debt-to-equity ratio, time in business, and annual revenue the company earns

● List all the loans you actually qualify for so you know feasible loan options

● Consider current interest rates and whether they’ll be fixed or variable, along with the length of the loan

● Compare the different loan offers from a variety of lenders to help find the best opportunity, including looking at application fees and repayment terms

● Determine if you’ll need to have collateral – and what type

It’s important not to rush into a decision. Carefully weigh options and consider where you project your business to go during the time frame you owe money.

Gather information like your EIN to apply for a small business loan

To qualify for most business loans, you’ll need to have an Employer Identification Number (EIN). This numerical identifier is similar to a Social Security Number, but it’s used strictly for businesses.

Your EIN will be helpful if you don’t have a business credit history, although, in this scenario, you may also need to supply your Social Security Number to the lender as well. If your company is well-established, you can use your EIN to apply for your business loan since your business credit score will be attached to your EIN.

If you do not have an EIN, it’s easy to apply! Aside from gaining better access to business loans, there are a variety of other beneficial reasons why you should have an EIN.

Submit your application for a small business loan

Once you fill out your loan application, be sure to meticulously go over it to make certain all the information you’ve entered is accurate. Mistakes may result in problematic issues, including loan application denials. Once you’ve ensured your application is correct and in order, you can submit it. If your application is accepted, be sure to review the loan terms before you sign on the proverbial dotted line.

Use the loan to build your small business!

Congratulations! You’ve successfully obtained a loan. Now that you have the capital you need, you can use this money for the projects you desire to achieve. Whether you’re launching a new business or expanding an already established one, having extra cash on hand can go a long way toward achieving your goals.

Beginning the journey to entrepreneurship is an exciting prospect. However, before jumping in and getting started, you’ll want to make certain your company secures the correct business permits and licenses it needs to operate in accordance with local laws. Not following your state, city, or county’s laws can result in severe penalties and problematic issues.

The prospect of applying for permits and licenses can be intimidating, but here we’ll give a basic run-down to help simplify the process. Understanding the complexities and knowing how to be compliant with regulations will help make the process far less overwhelming.

Make your business official with an EIN

One of the first steps you should take, along with deciding upon your business structure and then registering it, is to apply for an Employer Identification Number (EIN). You’ll need this unique identifier to show local officials your business exists. The EIN works like a Social Security Number but is used strictly for businesses.

Additionally, you’ll want to obtain this unique identifier not just for permits and licenses but so you can hire employees, file tax returns separately from personal taxes, open business bank accounts, and pursue business loans. You can apply for an EIN via mail or online.

Why do you need permits and licenses for your business?

You’ll need to adhere to federal, state, and local requirements to legally operate. To do this, businesses need to secure specific permits and licenses. Going through the correct channels demonstrates to the public you:

● Can legally operate your business

● You meet the legal standards for your area

● You meet the legal standards for your industry

● Are up-to-date on health and safety guidelines

The types of permits and licenses businesses obtain before they operate vary depending on the specific type of company being run. You’ll probably discover you need to obtain a combination of permits and licenses.

Choose the type of permit or license your business needs

Carefully perform research to learn precisely the different permits or licenses your company needs to have in place. Common types you may find you must obtain may include the following examples.

Examples of business licenses

This is a general overview of license types but is in no way a comprehensive list. Always check with your state, local, and federal rules to determine if you need to secure a special type of license to operate legally.

● General business license to operate in your state, county, or city

● Home occupation license to run your business from home or in a residential neighborhood

● Health and safety and/or environmental licenses if your company manages safety or environmental hazards

● Alcohol sales and production if your company is a restaurant, bar, retail, production facility, or transports alcohol

States often oversee certain industries, including but not limited to medical care, law, insurance sales, real estate sales, personal financial advising services, auto repairs, cosmetology, and other services/sales types.

Examples of business permit types

The types of permits you’ll need to secure to operate legally also depends on the type of company you run, what industry it’s in, or your business plans.

● Sales tax (or “seller”) permits to sell goods and collect sales tax if your state requires businesses to charge sales tax to consumers

● Zoning permit to operate a business in a designated location

● Location and land use permits to reserve the right to operate a business from a specific location, usually issued by county or city officials

● Building or construction permits if you need to do major repairs, expansions, or other modifications to your business’s location

This also is not a comprehensive list but includes some of the most common types of permits. Other potential permits you might need include a sign permit, fire department permit, or health permit, to name a few. Always check with your state and local municipality to see exactly which permits you should apply for.

Prepare and submit your application for a local permit or license

Each state has a website for both licenses and permits to help you find the proper forms you need to file. In the event you’re required to have a federal license or permit, check with the specific federal agency to obtain the correct forms.

Once you’ve located the right forms, you can start to fill out each application and gather the required documents. Common types of documentation you’ll need to provide to governing agencies include:

● List of owners, managers, and investors allowed to sign on the company’s behalf

● Your EIN (tax ID)

● A description of your business, its location, and what types of products or services it offers

● Pertinent business records relating to business structure and bylaws

● Financial records and statements

● Insurance details

Additionally, you’ll need to pay any required application filing fees. Keep in mind, your licenses and permits may go to several different federal, state, or local agencies. Be sure to keep each application in order and submit payments to the correct agency. In some cases, you may mail in applications or, in others, file through an online portal.

Wait for your permit or license application to be approved

Once you’ve submitted your application and permits, you might wonder how long it will take to receive approval. Unfortunately, there is no one standard answer to this question. Ultimately, it depends upon the specific agency, how many applications it receives, and if there is a backlog of applications. It may take days or months. In the meantime, you can move on to other important tasks involved with launching a new business while you wait.

Don’t forget to renew your local permits & licenses as needed

Keep in mind that obtaining local permits and licenses is not a one-and-done task. Many types of licenses need to be renewed on a regular basis. Determine which licenses and permits you’ll need to renew and keep a running list complete with dates. Most expire after one to three years, so set reminders. This way, your important ones do not lapse and jeopardize your company.

The employees you hire can help transform your company. Whether you’re currently a one-person operation or a large corporation, the employees you hire can add value to your company. Bringing on new employees empowers you to expand, access innovative ideas, and diversify skills. However, you want to be selective in who you hire, ensuring new employees fit within your company’s culture and are the right match to perform the tasks you need them to do. In this post, we’ll take a look at important steps you should take when deciding to hire new employees.

Apply for an EIN or tax ID

Obtaining an Employer Identification Number (EIN) is to every company’s benefit. This number is a business tax ID and works much like a Social Security Number. Before you start the hiring process, if you haven’t done so already, be sure to apply for your EIN immediately. If you’re planning to bring on new employees, you must have an EIN to legally hire them. This number enables you to withhold payroll taxes and be able to report them to the IRS. Your state may also have specific requirements as well.

Attract potential employees to hire with a descriptive job listing

It’s in your best interest to set aside some time to write a descriptive and accurate job listing. This way, you won’t be flooded with applications from the wrong candidates, and you can attract the right ones. A good job description lets the applicant know what their job will entail, and they can decide if they are qualified (or under/over qualified) before applying. Be sure your job description is:

● Clear and concise

● Free of typos and grammatical errors

● Free of industry buzzwords

● Clear about the duties and responsibilities of the job

● Descriptive of your organizational values

● Honest in compensation and benefits packages

By putting effort into your job listing, you can attract top talent to apply while discouraging inexperienced candidates. According to Indeed, a quality job description positively influences a good candidate’s decision to apply, with 52% saying it is “extremely influential”.

Review job applications to find employee candidates to hire

Depending upon the current job market and your industry, you’ll either receive a slew of resumes or have difficulty attracting the right candidates. Many industries are currently experiencing a talent shortage. This can be a significant barrier in the hiring process. Using a good job description and screening process, you can be more selective and focus on the right candidates to hire.

As a result, it can be tempting to try to interview everyone since you want to hire the right person the first time. High turnover of employees is costly, so it’s a better strategy to first try to identify your top candidates before you begin your first round of interviews. You can always revisit and conduct a second round of interviews later if necessary.

To identify the right candidates to interview, you’ll need an efficient way to screen applications to identify good-fit individuals. This way, you can first focus on qualified and truly interested candidates and not waste time on applicants who are applying everywhere.

If you automate applications by using an applicant tracking system (ATS) (even small businesses can use this software), you’ll improve your chances of finding good candidates. You can also request cover letters from prospective employees, so you can get a good read on who they are and what they can bring to your business.

Interview your top employee candidates to better inform your hiring decision

Once you’ve identified your top employee candidates, it’s time to begin scheduling interviews.

Start With Phone or Zoom Interviews

To streamline the process, consider starting with preliminary phone or Zoom interviews. This facilitates introductions, and you can get a good read on a person before scheduling time to bring them in for an in-person interview.

During this meeting, you can talk about the job and its responsibilities, compensation packages, and organizational culture. This will help both you and the candidate determine if you should proceed to an in-person interview.

Shift to In-Person Interviews

Once you’ve created a list of candidates you believe would be the best fit for your position(s), start to schedule interviews with them. Good questions to ask include ones related to:

● Background interview questions, such as previous experience, why the candidate chose the field, past achievements, future goals, strengths and weaknesses, and other relevant details about themselves.

● Behavioral interview questions to learn more about the applicant’s skills and see how they have handled specific scenarios in the past. This will give you a good idea of how they have previously handled conflict, provided solutions, or otherwise acted during a work situation.

● Situational interview questions to ask candidates what they would do in hypothetical situations that could feasibly happen during their workday in your organization.

Before you bring candidates in for appointments, establish a set of questions to ask each candidate. This way, you can easily compare answers to help identify the right person to hire.

During the interviews, be sure to be an active listener, so you can truly glean what each candidate has to offer your business. This will help you to make the best decision and avoid high employee turnover. If you find none appear to be a good fit, go back to your stack of resumes and start connecting with your second round of candidates.

Make a final choice about the best employee to hire

Once you’ve interviewed your top candidate choices, chances are you’ll probably have a short list of people you envision working for your company. To choose the right one, don’t be hasty. It’s better to hire the right person than to lose them and have to go back to the drawing board.

● Consider cultural fit

● Think about personable attributes

● Factor in both hard and soft skills

● Contact references

If necessary, call your top candidates back for a second round of questions to help you better determine which ones are perfect for the job.

Hiring the right employees can seem difficult, but breaking it down in stages makes it an easier experience. It all starts with obtaining your EIN.

An Employer Identification Number (EIN) is an IRS-assigned number to recognize a business entity that operates in the United States. An EIN is used for any business tax returns or legal purposes.

You may apply for an EIN by fax, mail, telephone (International applicants), or the fastest way – applying online. To apply, fill out Form SS-4, Application for Employer Identification Number. In some cases, when a certain requirement is not met, your EIN application may be rejected or you may receive an IRS reference number that indicates an error.

Here are some common mistakes to avoid when applying for an EIN.

Incomplete Or Inaccurate Information

To avoid any delays in obtaining your Employer Identification Number (EIN), be certain to prepare and submit all the required information. This information includes:

●       The legal business name

●       Your legal name

●       Business address, street address, country, and state

●       Name and Social Security Number (SSN) or TIN of the responsible party

●       Type of business structure

●       The number of members (if applying as an LLC)

●       Key business dates

●       Primary activities of the business

●       Previous application (if applicable)

Incomplete or inaccurate information about your business or its responsible party could result in a rejected application as it does not tally with the information the IRS may already have.

Multiple Applications

Applying for an EIN is an easy process, but how many EINs can someone obtain?

If you run a single business with different divisions, only one EIN is needed for the whole business entity. However, if you have multiple business entities, each of them should be treated as unique. This means one EIN per entity, as it is not possible to use the same EIN for all your business entities even though the responsible party or applicant is the same. 

Here are some best practices for obtaining more than one EIN:

●       Submit a separate SS-4 form for each additional EIN.

●       None of the forms can be dated or filed on the same day as the IRS only allows a single taxpayer to apply for one EIN daily.

●       Don’t submit multiple forms for the same business entity as repeated entries may be regarded as errors in the system.

Improper Selection Of Business Entity Type

When filling up Form SS-4, make sure to indicate the correct legal structure for your business, as each business entity is taxed differently. Those include:

●       C-Corporations

●       S Corporations

●       General Partnerships

●       Limited Partnerships

●       Multi-Member LLCs

●       LLCs Taxes as Corporations

●       Single Member LLCs with Employees

●       Sole Proprietorships with Employees

Before submitting Form SS-4, review that you have selected the correct business entity type.

Note: Single-member LLCs and sole proprietorships without employees do not need an EIN. Only an SSN is required for these business entities.

Missing A Responsible Party

All EIN applications must disclose the names and Taxpayer Identification Numbers (SSN, ITIN, or EIN) of the responsible parties as they control, manage, and direct the entity for the distribution of its assets and funds.

It is important not to exclude the details of any responsible party during the EIN application. A correct SS-4 Form should include the name, Taxpayer Identification Number, and signature of the responsible party.

If there are any changes to the responsible party for your LLC, you will need to fill up Form 8822-B (Change of Address or Responsible Party —Business) and mail it to the IRS as soon as possible.

Missing Appropriate Forms

An EIN application is easy to understand and quick to complete as there are no extra forms needed besides Form SS-4 submitted to the IRS.

You must provide the latest up-to-date information in your Form SS-4. However, if you are making changes to the business’ responsible party, address, or location, then Form 8822-B must be submitted and reported to the IRS. Include all the details of your personal and business information as they support your application process.

Applying Before Incurring Tax Liabilities

If your business is an LLC, and you wonder if you can obtain an EIN before your LLC is formed – the answer is to wait. You should ensure the name of your business is properly registered and not rejected, and when applying for an EIN, the IRS will request the approved legal name that was approved and the date the business was formed.

Most business owners form or register their LLCs with the state before obtaining an EIN.  If you apply for an EIN without registering your company with your state first, you will most likely get your EIN application rejected. We recommend waiting until your LLC is formed before applying for an EIN.

What Happens If I Make A Mistake On My Application?

Made a mistake in applying for your EIN? Here’s a guide to help you when you receive a rejection notice from the IRS:

1. Contact the IRS, rectify the information on your Form SS-4, and send a letter to the IRS to make these changes. Be sure to complete the process by including all necessary business information in your letter along with the correct changes made.

2. The waiting time for this process may take up to 30 days to update your current information in the government database.

3. If this is your first time applying for an EIN and it gets rejected, you may need to review your records, make changes, and submit your application again.

Where Do I Apply For An EIN?

If you are looking to expand your business opportunities and wish to obtain an EIN, let us assist you. Apply for your EIN today.

An Employer Identification Number (EIN) is a unique nine-digit tax identification number given by the IRS to businesses, organizations, and other entities for filing taxes and reporting purposes. This EIN works as a federal tax identification number which you will need to pay federal taxes, hire employees, create a business bank account, and apply for business licenses and permits.

When Is An EIN Required?

An EIN comes in handy when you are hiring employees, operating as a partnership/corporation, filing tax returns, or withholding taxes from income other than wages. Bear in mind that all business owners of all types of business entities (except sole proprietorships) must apply for an EIN.

Obtaining an EIN is the first crucial step for business owners as it provides an advantage for your business operations and financial management. If your business is one of the following legal structures, you should consider applying for an EIN:

●       Limited liabilities companies (LLCs)

●       Non-profit organizations (NPOs)

●       S Corporations

●       Partnerships

●       Estates

●       Trusts

The IRS does not consider the size of a company when issuing EINs, so even if you only have one employee, you are still eligible to apply for an EIN. Sole proprietors need not apply for an EIN, but they may do so if desired.

Advantages Of Getting An EIN

In general, applying for an EIN separates your business from your personal finances as it simplifies any bookkeeping and accounting processes. You might wonder if you need to renew your EIN yearly: the answer is no. EINs do not expire so you don’t have to get them renewed once you obtain one.

Even if you are not required to apply for an EIN (like sole proprietors, for instance), you might consider acquiring one because sometimes, not getting an EIN may cost you more in the future. Here are some benefits of an EIN number.

Avoid Tax Penalties

An EIN is basically a tax ID number assigned by the IRS for tax obligations. However, if you haven’t already obtained an EIN by tax day, you will not be able to file taxes for your business. You have the option to inform the IRS of this predicament, but this may delay your filing, and result in penalties for late returns. Keep in mind that when you keep accurate records, file, and pay your taxes on time, you are able to avoid tax penalties. Timely record-keeping, timely payment of taxes, and complying with tax laws can help you avoid tax penalties.

Prevent Identity Theft

If you are wondering if an EIN can protect you from identity theft: yes, it can.  An EIN separates all personal finances from business finances.  Once you have obtained your EIN, you do not need to give your Social Security Number to clients or vendors who you collaborate with. As we all know, your SSN is strictly confidential. Carelessly sharing this information will increase the chances of identity theft and access to your profits.

Open A Business Bank Account & Speed Up Loan Applications

An EIN allows you to speed up loan applications as long as you have all the necessary information to conduct your business. Therefore, you should get an EIN if you are planning to take out a loan. Some lenders may require you to have a business bank account with deposits, which is where an EIN comes in handy. Most banks require business owners to have an EIN in order to open a business bank account. (Note: Some banks allow sole proprietors to open a business bank account without an EIN, but this varies as some have stricter policies.)

Establish Business Credit

Business credit is proof of your company’s track record in timely bill payments and proper financial management. Why should you keep a good credit score?

●       It helps in your business loan applications.

●       As your business credit increases, you will gain more access to funding for your business (eg: loans, credit cards, and other financing options)

●       You can negotiate better payment terms with your customers, suppliers, and vendors.

Let’s say your personal credit score hasn’t been the best. When you use your EIN to apply for credit, it will show up solely on your business’ credit report. This means none of your bad personal credit history will affect your business’ credit score, making way for all the benefits above. Obtaining an EIN will work in your favor in this case.

Hire Employees

If you plan to hire employees, then you are required to have an EIN. Can you apply for an EIN even if you have no employees? Yes, you may. It is hard to predict when you might hire in the future but as your business scales and you need to delegate work to a team, getting an EIN earlier could be a good thing. An EIN will ease your hiring process, from setting up payroll to hiring your first employee.

Protects Personal Assets

Obtaining an EIN for your business can help protect your personal assets by establishing your business as a separate legal entity. If a lawsuit arises, your personal assets are protected. However, some personal assets can be at risk if you are unable to pay your business loan or lease which was personally guaranteed by you. Engaging in fraudulent or illegal activities may also hold you liable regardless of your business structure. Overall, while the EIN protects your personal assets, do consider adopting proper business practices or liability insurance to protect your assets and yourself.

How Do You Acquire An EIN?

Now that we’ve illustrated the benefits of an EIN number for your business, you can start applying for one. You can do it yourself on the IRS website, but you don’t have to. We’re here to help.

One of the earliest administrative tasks for any business or organization is to apply for an Employer Identification Number (EIN). The EIN is a number issued by the Internal Revenue Service (IRS) to identify businesses in the U.S. for tax purposes.

Applying for an EIN is a procedure that involves several steps and requires relevant paperwork and documentation. You can obtain your EIN alone, but you don’t have to.

This article explains the 4 main benefits of using an external filing service to obtain the EIN. It will make the process faster and smoother, save you time, and increase your chances of getting the EIN approved.

Introduction – Importance Of An EIN For Businesses

You may be unsure of what an EIN is and whether you need it. According to IRS regulations, an EIN is required by businesses and organizations that are conducting business in the U.S. and file certain tax returns, such as excise taxes on goods or services.

Obtaining an EIN is not only beneficial but a necessary step for businesses. If you want to do the following, you will need an EIN:

●       Open a business bank account

●       Apply for a business loan and/or credit card

●       Hire employees

●       Apply for business permits or licenses

●       File federal and/or state tax returns

An external filing service acts as a third-party designee, helping business owners apply for the EIN for a small fee. Let’s go over the advantages of hiring an external filing service provider.

Expertise – Familiarity With EIN Application Process

As we all know, paperwork can be extremely tedious. In the process of applying for an EIN number, you will have to fill out endless forms, furnish supporting documents, and send those to the IRS. Sometimes applicants who go at it alone will get their EIN application rejected due to special characters or symbols in their form, mismatched information, or unanticipated system errors. This is no fun.

On the flipside, if you leave this mundane task to a third-party designee that has successfully applied for EINs for thousands of businesses, you know you will be in good hands. Since they are experts who are very familiar with the EIN application process, they are up to date on the exact requirements, timelines, and documents needed, as well as do’s and don’ts. This means there will be no errors on your application, leading to faster and higher chances of EIN approvals.

Convenience – Time-Saving Benefits

As a business owner, it can seem like there’s an endless running list of things to do. And everything is a priority. But smart business owners will know that no man is an island. This may be a hard pill to swallow for independent entrepreneurs, but you cannot do everything yourself.

Outsourcing allows you to focus on your business growth instead of admin tasks like applying for a federal tax ID number. To apply for an EIN, the entire process can take up to a week, from gathering information and documents to filling out the form and submitting it to the IRS. By hiring an external filing service, you get to save time as they will take care of the process for you and manage any back-and-forth communications with the IRS.

Faster Processing – Compared With Direct IRS Application Processing Times

Hiring an external filing service provider to apply for your EIN puts you at the forefront compared to businesses that are navigating the process independently. They are bound to hit more speed bumps in the application process, which could result in an error, leading to a rejected application. Then, they’ll need to restart their application wondering what went wrong.

By going through an experienced third-party designee, you get an expedited external review of your Form SS-4 (Application for Employer Identification Number). With best practices applied, this will increase your chances of getting the EIN. If your online application is approved, you’ll receive your EIN number within an hour of submitting it.

Benefits For International Applicants – Navigating The IRS Application Process For Non-US Residents

Applying for an EIN is drastically more challenging for non-U.S. residents who want to register their businesses here. Foreign individuals who have a U.S.-based business or organization can only apply for their EIN by fax, phone, or mail, which have longer processing times of up to 4 weeks. There are also other factors to consider such as whether the applicant has a valid Taxpayer Identification Number or not.

An external filing service provider can be of tremendous assistance to non-U.S. residents and ease any anxieties around the EIN application. They can answer any questions, provide advice, help you fill out the form correctly, and make sure your application arrives at the IRS seamlessly. It takes the hassle out of navigating the complex IRS rules and regulations, especially as a non-U.S. resident.
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Considerations When Selecting A Service Provider

When selecting a third-party designee to apply for your EIN, here are 5 things you should consider:

●        Legal compliance: The service provider should be registered and licensed so that you get peace of mind knowing your application is being handled by a trustworthy entity.

●       Expertise and experience: Seek a service provider that’s experienced in filing EIN applications for businesses in your industry. Check if their website has a resource center for business owners. This usually demonstrates their expert knowledge on business tax and EIN matters.

●       Cost: Consider the cost of the service provider’s fees and how they compare to other providers. Service providers with very low fees may not provide the level of guidance and expertise that you need, while higher fees usually indicate a better reputation and quality of service.

●       Turnaround time: Check that the service provider’s turnaround time aligns with your timeline. The last thing you want is for the application process to negatively impact your business.

●       Communication and availability: Ensure that the service provider is available to answer your questions and provide support throughout the application process.

Conclusion

With years of experience in handling EIN applications across various industries, we possess the knowledge and expertise required to navigate the EIN application process.

Let us help you get your EIN applications sorted out and approved. If you are still exploring your options, click here to learn more about applying for an EIN.

If you are an owner of a business or an organization that has to file tax returns, you may know that you need to apply for a tax ID number. You may have come across the terms EIN and State Tax ID Number, but how are they different and which one applies to you?

In this article, we address commonly asked questions about State Tax ID Numbers vs EIN. By the end of this post, you’ll know exactly which ones your organization needs to apply for.

What Is The Purpose Of Tax IDs?

Annually, businesses operating in the United States are required to pay business tax to the government. This is where tax identification numbers or tax ID numbers come in.

Tax IDs are to businesses what Social Security Numbers (SSNs) are to individuals – they serve to identify the business or organization paying taxes. The IRS needs this number to distinguish one entity from another since they cannot be distinguished solely by their names.

Tax ID numbers exist at the federal level, for federal taxes. We call this the EIN (Employer Identification Number). They also exist on the state level, for… you guessed it – state taxes. We will dive deeper into the differences in this article.

Which Businesses Need Tax IDs?

Now, let’s talk about which businesses need tax IDs and which ones don’t. Just a heads up: we are referring to the federal tax ID, used for paying taxes to the federal government. Every state has unique regulations around state tax IDs, so please check with your Secretary of State.

So, which types of entities need to obtain a federal tax ID? Organizations that hire employees, withhold taxes on income, or file certain tax returns (Employment tax, Excise, Alcohol, Tobacco, or Firearms tax) need to obtain one.

The Internal Revenue Service (IRS) lists these entities as mandatory to have a federal tax ID:

●       Limited Liability Company (LLC)

●       Partnership

●       Corporation

●       Trust

●       Estate

●       Non-profit Organization

●       Church Organization

Sole proprietorships, where the business entity is one with the individual, file taxes using their SSN. This means they do not need to obtain an EIN, even though they can. Filing for an EIN as a sole proprietor or freelancer has its benefits.

Are Federal And State Tax IDs The Same Thing?

You may be wondering, “Is an EIN the same as a State Tax ID?”

They are not the same thing. A federal Tax ID number, which is the EIN, is issued by the IRS for tax purposes. It is also used by banks and licensing bodies. An EIN has 9 digits and is formatted in this way: XX-XXXXXXX.

State tax IDs are issued by the state. This could be the Secretary of State, Department of Revenue, or something else. The format for this number also varies by state. For example, the Texas Comptroller issues an 11-digit ID called the Texas Taxpayer Number. In Colorado, your entity would be given an 8-digit ID called the Colorado Account Number by the Department of Revenue.

As you’ll see, the regulations for State Tax IDs vary by state. We recommend you check with your state when you are registering your business entity.

Do You Have To File State And Federal Taxes?

All business entities need to file some form of federal tax. However, the same cannot be said about state taxes, which again, has a unique set of laws.

Federal Taxes: There are 5 general taxes that a business may need to pay depending on its legal structure. The IRS website explains in detail all of these taxes, but here is a summary:

●       Income Tax – Filed annually by all businesses except partnerships.

●       Estimated Tax – Filed by individuals, including sole proprietors, partners, and S corporation shareholders.

●       Self-employment Tax – A social security and Medicare tax primarily for individuals who work for themselves (freelancers, sole proprietors, etc.)

●       Employment Taxes – For businesses that hire employees.

●       Excise Tax – Taxes that apply for certain goods and commodities as well as any licenses granted to operate certain types of businesses.

State Taxes: Some states do not charge business tax. For instance, Alaska and New Hampshire do not charge income tax or sales tax. Other states that do not charge income tax include Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming.

If you are in any of these states, you are exempt from paying state taxes. If you are in a state that does charge income tax, your state’s Department of Revenue or tax website will provide all the necessary information on filing state taxes.

Is An EIN The Same As A Federal Tax ID?

Yes, they are the same. The EIN is also known as:

●       Federal Tax ID

●       Federal Tax Identification Number

●       Federal Employer Identification Number (FEIN)

●       Employer Tax ID Number

How To Register For An EIN

To register for an EIN, applicants must fill up Form SS-4 and provide the required information. Click on the directory below to begin applying for an EIN.

Still have questions? Learn More About Applying For An EIN.

Do I need to pay taxes as a freelancer? Do I need an EIN as a freelancer? Any business operating in the U.S. needs to pay taxes – this is no different for freelancers.

The Internal Revenue Service (IRS) uses Taxpayer Identification Numbers (TIN) as a way to identify individuals in the execution of tax laws. A Taxpayer Identification Number may be issued either by the Social Security Administration (SSA) or by the IRS.

Your Social Security Number (SSN) is issued by the SSA, whereas other Tax ID Numbers are issued by the IRS. As a freelancer, you may either use your SSN or EIN to file taxes.

What Is An EIN?

An Employer Identification Number (EIN), also known as a Federal Tax ID Number, is a unique identifier for business entities, similar to that of SSNs for individuals in the United States. EINs are issued by the IRS and allow the IRS to easily identify businesses and track their tax responsibilities. They are made up of nine digits, formatted as XX-XXXXXXX. EINs are commonly used by employers for tax reporting purposes.

Businesses can apply for an EIN directly through the IRS. Business entities must apply for an EIN by phone, online, fax, or mail before they can begin operations. You must have an EIN if you:

●       hire employees

●       operate as a corporation or partnership

●       file a select list of tax returns

●       withhold taxes on income paid to non-resident aliens or any other income other than wages, or

●       are involved with a number of types of organizations such as trusts, estates, non-profits, and more.

So as a freelancer or independent contractor, where do you fall on this spectrum?

Do Freelancers Need An EIN?

You may be wondering, “Do I need an EIN as a freelancer?” First things first, a freelancer is a sole proprietor. They produce goods or services on their own without hiring any employees.

Most business structures need an EIN, but as a sole proprietor, there is slightly more flexibility. Technically, freelancers who operate on their own do not need an EIN. If you are a freelancer, you do not need an EIN to file taxes as you can just use your SSN.

With that said, should you get an EIN as a freelancer conducting business in the U.S.? There are many benefits to obtaining an EIN as a freelancer – let’s go over why you should. 

Why Should Freelancers Get A Federal Tax ID Number?

As a freelancer, it is beneficial for you to obtain an EIN for several reasons. For starters, a Federal Tax ID Number that is separate from your SSN will allow you to have a different identification number that can be used solely for your business tracking purposes, potentially limiting the risk of identity theft.

An EIN is also useful for opening a business bank account which could make it easier for you to manage your finances. Having a business bank account will allow you to make and receive payments relating to your freelance business into a bank account that is separate from your personal finances.

Getting an EIN for freelancers is also helpful for filling up W-9 forms should you go into any work that is worth more than $600. Once again, this will allow you to share an identity number for tax reporting purposes that is separate from your SSN. This is especially helpful if you are wary of sharing your SSN with businesses or clients that you only have one-off projects with.

How Can I Get An EIN As A Freelancer?

It is easy to apply for an EIN as a freelancer. The EIN application can be done directly through the IRS over the phone, online, by fax, or by mail. The method through which you apply depends on your location and resident status. (Only businesses located in the U.S. or U.S. territories can apply for an EIN online.)

Applying for an EIN is fairly easy and uncomplicated. To start, you will need to fill out Form SS-4: Application for Employer Identification Number which you can find on the IRS website. You will be required to share some information with the IRS.

First, you will need the name of your company’s principal officer, partner, trustor, owner, or any other title, along with their personal taxpayer identification number (that is, your SSN). Additionally, the application asks for the type of entity you are running, the reasons for applying for an EIN (such as registering a new business, change of organization, or IRS withholding requirement compliance), the start or acquisition date, and the principal industry of business.

Once all the information provided in the online application has been validated, your EIN will be provided immediately or within the hour. Applications by fax or mail can take from 2 to 4 weeks to be processed.