A personal service corporation is a C-corporation where at least 10% of the company’s stocks are owned by professionals who provide personal services to their clients. This category includes accounting, actuarial science, consulting, architecture, engineering, health, law, restaurants and the performing arts. To give you an example, imagine you run a law firm with a handful of colleagues, you form a c-corporation, and together, you own all the business’s stocks. In this case, your new business qualifies as a personal service corporation, and you need to get an Employer Identification Number (EIN). All personal services corporations need EINs, but luckily, applying is pretty straightforward. Check out the following tips to learn more.
Steps to Apply for a Tax ID (EIN) Number for a Personal Service Corporation
- Prepare Mandatory Business Information
- Apply for a Personal Service Corporation Tax ID (EIN) Number Online
- Apply for a Personal Service Corporation Tax ID (EIN) Number via Mail or Fax
- How Do I Obtain a Tax ID (EIN) Number for my Personal Service Corporation?
- How Long Does it Take to Obtain a Tax ID (EIN) Number for my Personal Service Corporation?
- Why Do I Need a Tax ID (EIN) Number for my Personal Service Corporation?
Basically, when you apply for an EIN, you provide the Internal Revenue Service (IRS) with details about your business. This gives the government the information it needs to identify your personal services corporation and generate a tax ID.
The application process is easier if you get together all the information you need before you start to apply. In particular, you need the following details:
- Legal name of your personal services corporation
- Doing business as (DBA) name of your personal services corporation
- Mailing and street address
- Name of the responsible party for your personal services corporation
- Whether or not your business is a limited liability company (LLC)
- Number of employees
- Type of employees
- Amount you expect to owe in payroll tax for the year
- Business services – the application requires you to choose a broad business category such as finance and insurance or healthcare, but you also have to type in a detailed response about your products or services
Finally, you need to sign the application and add your phone and fax numbers. If you designate another person to fill out your application, they also need to add their name, signature, and phone or fax numbers.
EIN online applications are easy to complete, especially if you have all the details at hand before you get started. To protect your safety, make sure you apply using a secure internet connection. Ideally, you want to be on a password protected private WiFi at your home or office, rather than on public WiFi.
In lieu of applying online, you can apply through the mail or by using a fax machine. You need to provide the same details as you do with the online EIN application. However, in these situations, you put the information on a paper application form rather than into an online portal. Then, you need to mail or fax in the form to the address or fax number specified on the form.
Wondering how do I obtain a tax ID (EIN) for my personal service corporation? To help you out, here are the steps:
- Decide how you want to obtain your EIN.
- Prepare mandatory business information as explained above.
- Start the application online or fill out a paper application if you want to use the mail or fax.
- Double check the application to make sure you filled out everything correctly.
- Submit the application.
- Wait for the amount of time specified below.
- Start using your EIN as soon as you receive it.
The answer to the question, “how long does it take to obtain a tax ID (EIN) number for my personal service corporation?” varies based on how you apply. If you apply for a personal service corporation tax ID (EIN) number online, you can get your number the day you apply or by the next business day at the latest.
In contrast, if you apply for a personal service corporation tax ID (EIN) number via mail or fax, you should expect to wait a bit longer. Faxed EIN requests take about four business days to process. For example, if you apply on Monday, you should get your personal service corporation EIN by Friday. To avoid delays, don’t forget to put your return fax number on the form.
If you mail in the application, the process takes about four to six weeks. As a result, you should apply for your EIN about two months before you need it. Regardless of how you apply, you can start using your EIN as soon as you receive it.
At this point, you may still be wondering, why do I need a tax ID (EIN) number for my personal service corporation, and the reasons are varied. First of all, C corporations need to file Form 1120 (U.S. Corporation Income Tax Return) every year. To identify your personal services corporation to the IRS on that form, you need an EIN. When you put this unique nine-digit number on your tax return, the government knows exactly which entity is submitting the form. This is exactly like how you put your SSN on your personal income tax return to identify yourself to the government.
If you purchase an existing business or if you’re changing your business structure (for example, from a partnership to a personal services corporation), you need to get an EIN in those situations as well. Banks also require businesses to put their EINs on bank account records and loan application so you need this number to make accounting easy.
On top of that, you also need to use your business’s EIN on payroll tax forms, and you cannot hire employees until you have this number. Similarly, you put the EIN on documents related to withholding taxes from foreign-based independent contractors. For instance, if you hire a foreign based freelancer to provide marketing services for you, you need an EIN to deal with their paperwork.