If you’re starting or running a business in Texas, you must obtain a Federal Employer Identification Number (EIN). Also known as a Federal Tax Identification Number, an EIN is essential for meeting federal tax obligations, opening business bank accounts, and hiring employees.
Whether you’re forming an LLC, partnership, or corporation or operating as a sole proprietor, securing an EIN is a key step in setting your business up for long-term success.
What Is an EIN?
An EIN is a nine-digit number assigned by the Internal Revenue Service (IRS) to identify a business entity for tax purposes. It’s like a Social Security number for your business. An EIN is used when filing federal taxes, reporting payroll information, and conducting business financial activities.
Why Your Business Needs an EIN
An EIN can simplify some aspects of your financial and legal responsibilities, even if you’re a sole proprietor or small business. Here’s how:
- Tax Reporting and Compliance – The IRS uses your EIN to track your business income and ensure compliance with tax laws. If your business has employees, you’ll use your EIN to report payroll taxes, Social Security, Medicare, and federal unemployment taxes. Even if you don’t have employees, some business structures are required to have an EIN to file federal income tax returns.
- Opening a Business Bank Account – Most financial institutions require an EIN to open a business checking or savings account. Keeping your business and personal finances can help maintain liability protection and comply with IRS standards. A dedicated business account can also make accounting easier and help you build business credit.
- Hiring Employees – If you plan to hire employees now or in the future, an EIN is a must. It allows you to process payroll, withhold and remit federal taxes, and comply with employment reporting requirements.
- Business Licenses and Permits – Many local and state agencies require an EIN when you apply for business licenses or permits.
- Privacy and Professionalism – An EIN provides an added layer of privacy for sole proprietors. Instead of using your Social Security number on business documents or tax forms, you can use your EIN. This helps protect against identity theft and presents a more professional image to clients, vendors, and contractors.
How to Apply for an EIN
Before applying for an EIN, make sure that your legal business name and structure are officially established. This means your business should be registered with the Texas Secretary of State (if applicable) and organized as a sole proprietorship, LLC, corporation, or partnership. Applying for an EIN before confirming these details can result in inconsistencies or delays.
Applying for an EIN is a straightforward process. There are three ways to apply:
- Online Application – The fastest way to get an EIN is through the IRS EIN Online Assistant. Once you complete the application, you’ll receive your EIN immediately.
- Apply by Fax or Mail – If you prefer not to apply online, you can submit Form SS-4 to the IRS by fax or mail. Note that processing times are longer than with the online method.
- Apply by Phone – This method is for international businesses only. If your business is based outside the United States, you can call the IRS at (267) 941-1099 to apply for an EIN by phone.
After you fill out the application, double-check all information for accuracy. Even small errors can lead to processing delays or denials. After receiving your EIN, save the confirmation notice in a secure location. This is your official proof of EIN assignment, and the IRS does not reissue it if it’s lost.
Get Professional Guidance from a Strategic Business and Executive Coach
While applying for an EIN is free and relatively simple, understanding when and why to get one can be more nuanced. Hubbs Law can help Texas business owners establish solid legal and financial foundations.
If you have questions about your business structure, tax responsibilities, or how an EIN fits into your overall legal strategy, we’re here to help. Contact us today to learn more.