When an Existing Business Needs a Tax ID Number
For those who have started a small business, there may be no immediate need for a tax ID number. In fact, many sole proprietorships operate with the owners personal social security number. This form of tax is allowable by the Internal Revenue Service unless the services that are offered by the small business include collection of sales tax, sales of firearms or alcohol or in the event that a small business owner decides to hire employees. But if you buy a business, you can get a Tax ID number for an existing business as well that is unique to your new business.
More commonly referred to as an "EIN" (Employer Identification Number) there are various business interests that require an EIN including:
Publicly traded companies – If a company offers stock to the public, they may be required to have an EIN
Sole proprietorships with retirement plans – A sole proprietorship who elects to undertake a formal retirement plan such as a KEOGH or other qualified plan will be required to have an EIN;
Partnerships – Certain partnerships may be required to have an EIN number since the company is owned by more than one person.
Why get a tax ID number?
In many cases, a tax ID number can help a business protect the identity of the owners. The owners of a company may prefer to not use their social security numbers for banking, credit or other business related activities. In some instances, this is a result of concerns arising out of potential identity theft. A tax ID number is also beneficial for filing taxes.
Application for a Tax ID Number
The application process for a tax ID number is not difficult. Business owners who wish to obtain a tax ID number for an existing business can simply go to the Internal Revenue Service website, and fill out the required forms online including Form SS-4. These forms may be printed and mailed, faxed or the process may be done by telephone. There are certain pieces of information that must be provided during the application process including:
Name of the business – The business name will be required on the application process. The business is not required to be incorporated, however, the IRS may require a business certificate from the city or town where the business is registered;
Address of the business – There are 2 addresses that may be applied to the IRS form. The first is the physical address of the business while the other is the mailing address;
Responsible party -While some business entities may select a nominee to act on their behalf, the responsible party must be the principal officer of the company. The responsible party must disclose their name, address and social security number;
Type of business – The IRS will also require the business to disclose their activities on the application form and may require additional information.
The application for a tax ID number may be filled out online by going to the IRS website. The form is available only during specific times, Monday through Friday from 6:00 am to 12:30 am, Saturday from 6:00 am to 9:00 pm and Sunday from 7:00 pm to 12:00 am. All times are in Eastern Standard Time. Users may also call 215-516-6999 during business hours to apply.
- Internal Revenue Service:
Publication 1635, Understanding Your EIN (PDF)
- Image credits:
Internal Revenue Service Logo Denelson83/Wikimedia Commons Public Domain
Form SS-4 Internal Revenue Service