As you are getting your documents organized for your S-Corporation, your Tax ID (EIN) number should be at the forefront of your priorities. Though your S-Corporation doesn’t have to pay income taxes, it will still need a Tax ID or an EIN Number – and it’s better to have it early than to get it later on. Here’s what you need to know.
- Prepare Business Owner Information
- Apply for an S-Corporation Tax ID (EIN) Number Online
- Apply for an S-Corporation Tax ID (EIN) Number by Phone, Mail or Fax
- How Do I Get a Tax ID Number for an S-Corporation?
- What Is the Difference Between an LLC and an S-Corporation?
- Why Do I Need a Tax ID for an S-Corporation?
Begin by collecting information about the company’s owner. For an EIN, you’ll need to know a business owner’s:
- Full name and date of birth.
- SSN (social security number) or ITIN (individual taxpayer identification number).
- Current mailing address.
Though an S-Corp is not always owned by a single person but rather by a collective of shareholders, it will be necessary for one person to file for the EIN.
An S-Corporation can apply for a Tax ID (EIN) Number by fax, mail or online. While all of these options are open, it’s both faster and easier to apply for an EIN Number through their internet. In order to apply through the internet, you need only give your company information to a Corporate Tax ID service. Your Tax ID service will acquire your Tax ID Number for you within an hour, letting you begin your company’s operations quickly.
Apart from online, there are a few ways you can apply for an S-Corporation Tax ID (EIN):
- By phone. You can begin the process of acquiring an EIN Number by phone, but you will be directed to complete it either online or through mail or fax. While calling in may give you more information about the S-Corporation Tax ID process, it isn’t an ideal method for acquiring one.
- By mail. You can mail in an EIN application, but mailing it in means that you will need to wait up to six weeks for a response. During those six weeks, you won’t be able to do anything that requires a Tax ID Number, such as hiring employees or opening business bank accounts. Your EIN application may be returned for more information or for errors in information, which will lengthen the process.
- By fax. You can fax a Tax ID Number form and receive an EIN Number by fax, but there are a few reasons why this may not be ideal. If your fax is not received or processed, you may never know; an error code may not be returned to you. You will need to wait at least a few days for your Tax ID Number even if the form was complete and correct – and if the form was not complete or correct, you will need to begin the process again.
As you can see, there are downsides to these options. You will need to wait for an EIN Number if you use any method other than an online application.
You can get a Tax ID Number for an S-Corporation through a Tax ID service. A Tax ID service will go over your business information and business owner information to apply for the Tax ID Number on your behalf. By applying online, the Tax ID service will be able to get you your tax ID within an hour. Using an ID service is the easiest method, as you can avoid potential mistakes and delays.
An S-Corporation is designed primarily to change the way that taxes are paid. While externally, they may seem to be structured quite like an LLC, there are a few core differences:
- Profits from an S-Corporation can be paid out as dividends rather than salaries, thereby being taxed at a lesser rate.
- S-Corporations do not require owners or shareholders to pay self-employment tax, which can be considerable.
At the same time, LLCs and S-Corporations also have some similarities:
- Both will protect you from individual liability.
- Both will let you deduct business expenses above the line.
- Both require a Tax ID or EIN Number to hire employees, open accounts and more.
An LLC is often easier to set up and requires less paperwork. However, there are long-term benefits to using an S-Corporation in terms of taxation.
You are not legally required to get a Tax ID (EIN) Number for an S-Corporation, but on a practical level, it is a virtual necessity. Without a Tax ID Number, an S-Corporation will not be able to hire employees. This is why a Tax ID Number is also known as an EIN: Employer Identification Number. Most S-Corporations will need to hire at least a few employees, which makes an EIN a requirement.
A Tax ID Number is further used by many banks to track things like business checking accounts, business loans and business credit cards. If your business needs a line of credit or needs to acquire a loan, it will usually need a Tax ID (EIN) Number. Further, a Tax ID Number is often used for business-to-business services, such as getting a wholesale license for goods.
Finally, an EIN is also often used to apply for licenses and permits with the government. A Tax ID or EIN Number is commonly used as an identifier for the business when it comes to government or financial matters, much like a social security number is usually used for an individual. There is no downside to acquiring an EIN, the process can be fast and simple, and there are many situations in which an S-Corporation (or any business) will need one.