How and Why Should a Foreign Business Owner Get an Employer Identification Number
If you recently moved to the United States and want to start a business or expand the business you already have and are considering getting an EIN, this article will be very helpful to you. An EIN, or Employer Identification Number, is also known as a Tax Identification Number or a Federal Tax ID Number. These three names are used interchangeably, but Employer Identification Number is the most common and known terminology. An EIN can be given to employers, sole proprietors, corporations, estates, trusts, partnerships, some individuals, and additional entities additional support. Some LLCs will require an EIN, so look into this as well. An LLC, or Limited Liability Company, can be formed to own and operate a business. These are very popular because they offer the same limited liability protection as companies, but are easier and cheaper to use.
Reasons To Get An EIN
The main reason to get an EIN is for taxes and tax reporting. An EIN shelters your business assets from being garnished in case of a lawsuit by distinguishing your money from the company’s money. Your company will be its own separate entity with its own tax filings and business expenses. It’s important to distinguish personal expenditures from those of your company so itemization is easier when it comes time for filing taxes. This veil will protect business owners from personal liability on business debts. If you hire employees, an EIN is necessary for their tax withholdings, to set up payroll, and track payroll taxes. An EIN is needed when registering for your State’s employer taxes, paying worker compensation, and withholding income taxes for your employees. If your employees don’t have taxes taken out of their paychecks throughout the year, they might be surprised by a lump sum owed when tax season rolls around. If this was not planned and considered throughout the year, your employee(s) might not be able to pay what is due. Your employees will not appreciate this surprise. An EIN allows a foreign company owner to start a business in the United States, even if they don’t have a social security number. You can collect salaries, move company money around, hire and pay employees, and report and file taxes.
Getting An EIN As A Foreign Person?
If you are a foreign applicant you will need to complete an SS-4 Application for Employer Identification Number paperwork. You do not need a social security number or a permanent address to apply to start a business in the United States if you complete this form. There are several ways to apply for an EIN if you are a foreign applicant. You can call the toll free number 267-941-1099 between 6:00 a.m. and 11:00 p.m. Monday through Friday and speak directly to an IRS representative. You can fax the form to 304-707-9471. Finally, you can mail your application to the Internal Revenue Service, Attn: EIN Operation, Cincinnati, OH 45999. The form can be found and downloaded as a PDF from the IRS website, www.irs.com. Make sure this paperwork is complete and accurate to avoid any unnecessary delays. You want to get your business up and running as soon as possible, and don’t want paperwork technicalities to slow down the process.
If you decide you would prefer to call, to speed up the process, be sure to complete the SS-4 form beforehand so that you have the answers ready when an IRS representative asks them. This will help speed up the process so and prevent you from having to search for information while on the phone. At the end of this conversation, your IRS agent will give you an EIN number. Be sure to write this number down on your SS-4 form, then sign and date it. Be sure to keep track of this number and information. Now that you have it, you don’t want to have to ask the IRS a second time what it is.
What is a Third Party Designee?
Having a third party designee might be a better option for you and your business. You can have a third party get your EIN. That person would need to fill out the Third Party Designee section of the SS-4. This will allow that person to get the EIN and answer IRS questions. If there is a language barrier a third-party individual might be a good alternative for communication. After the EIN is given, this designated person can no longer contact the IRS for you. This is a bridge to expedite and simplify the process. Having a third-party designee is only necessary under specific circumstances. Most people apply for an EIN with their own name and information.
Here are some other helpful details about your EIN. You do not need to have an EIN if you have a social security number. If you use your EIN instead of your social security number you are less likely to have your identity stolen because you keep business and personal finances separate. This is the main reason to have both an EIN and a SS number, but again it is not required. Another important detail is that there is no difference between your EIN, a Federal Employee Identification Number, and Taxpayer Identification Number. These terms are interchangeable. So when you hear one instead of what your familiar with, know that you are talking about the same information. If you need to look up your EIN you can contact the IRS and have it emailed to you. You can also look on tax returns or business documents as it is typically printed on them. It is always important to keep track of old paperwork like this. Many important and personal information can be found on it. Keep these documents in an organized and safe place. If you do dispose of them, do it properly by shredding the documents.
Identity theft is a very real concern. You don’t want to start this process over again because someone else was using your EIN or social security number. If you lose your EIN, first look for a confirmation email or letter, or find it on business or tax documents. This is where having an organized file in a drawer or file cabinet is a helpful idea. You can also call an IRS representative Monday through Friday 7:00 a.m. through 7:00 p.m. at 1-800-829-4933. There is a difference between an EIN and a DUNS. EIN is given by the IRS for business tax purposes. DUNS is issued by Dun & Bradstreet to help businesses create and identify their credit reports.
Benefits of Obtaining An EIN
There are many benefits to having an EIN instead of just a social security number. Building business credit for financial stability is one perk. This can give you better interest rates and more and better options for business loans. If you ever need these, it will be very helpful to have established credit with your company. This can help you get lower interest rates and larger loan amounts. To open a business bank account, most banks will require an EIN. A business account is another way to keep personal and company finances separate. Business bank accounts also give you access to financial professionals. These professionals can help you with budgeting plans, buying a car, payroll services, and applying for business loans. With a business bank account, some banks will also let you open a credit card with them. A business bank account and bank credit cards will help your company run more efficiently.
For foreign business owners who are looking to start a business or build on their existing business in the states, having an EIN number is in your best interest for many reasons. It is not difficult to obtain and will help you with your business endeavors in a variety of ways. Get your EIN and start building your company empire. The United States is still the land of opportunity. Your first step toward this opportunity might be getting your EIN.