An Employer Identification Number (EIN), also sometimes referred to as a tax ID number, is like a social security number for your business.
Applying for an EIN isn’t dependent on whether or not you are just getting started, if you’re making a certain amount of money yet, or even if your business is part-time because you also work for someone else. It depends on how your business is structured (organized/set up).
Here are the requirements for applying for an EIN:
- If you register your business as an LLC, you are creating a separate legal entity so I would register for an EIN with the IRS. Remember, the EIN is like the social security number for your business. You’ll need this EIN to open a bank account and if you hire employees in the future.
- If you register your business as an S corporation or C corporation, you are required to have an EIN.
- If you don’t register as an LLC or corporation (or haven’t registered yet) then you are operating your coaching business as a sole proprietorship. This basically means that you are running your business under your social security number and your name or if you have a different name from your business, it’s under a dba (doing business as). In this case, you aren’t required to register for an EIN. BUT, if you don’t want your social security number floating out there on tax forms associated with your business (Form W-9 and 1099’s people will send to you) then you can apply for an EIN.
- If you are operating as a sole proprietorship AND have employees**, have to file excise taxes or a pension plan (not very common in sole proprietorships) then you WILL need to register for an EIN.
When you set up your business under these types of structures (LLC or corporation), you are legally creating a separate entity (separate from yourself). It can be an adjustment to wrap your mind around – especially since you are the owner of your business. But YOU are separate from your LLC (or corporation), so having an EIN (remember, it’s like a social security number for your business) is the way to go.
You can apply for an EIN by filling out an SS-4 online with the IRS at www.irs.gov.
If you want to make sure your business is set up right (and what order to to them in), here’s a free checklist that will help you make sure you have your all your financial bases covered.
* If you are the only owner of your LLC and are filing your taxes that way, you’re considered a disregarded entity. Megan, why the jargon? This terminology is important when you are registering for the LLC’s EIN with the IRS (say that three times fast)!
** Employees you pay wages to and withhold payroll taxes from. This isn’t referring to independent contractors you pay.