When you start a limited liability company (LLC), in most situations you will need to obtain an Employer Identification Number (EIN). In Massachusetts, the process of obtaining an EIN is simple. Here you will find all the details of the process.
What is an Employer Identification Number (EIN) for LLCs?
Your Employer Identification Number, or EIN, is like a social security number for your company, allowing the IRS to easily identify your business. It is also known as a Federal Tax Identification Number (FTIN), or sometimes for corporations, it’s called a Tax Identification Number (TIN).
An EIN is used to identify US businesses and contains information about the state the company is registered in. It also identifies the taxpayers who are required to file tax returns for the business.
It is used by employers for filing taxes and is generally required for businesses when they open a business bank account.
Who needs an EIN?
The IRS has established simple rules for which businesses require an EIN. If you answer yes to any of the following questions, you need to obtain one in Massachusetts:
- Do you have employees?
- Do you operate your business as a corporation or a partnership?
- Do you file any of these tax returns: Employment, Excise, or Alcohol, Tobacco and Firearms?
- Do you withhold taxes on income, other than wages, paid to a non-resident alien?
- Do you have a Keogh plan?
- Are you involved with any of the following types of organizations?
- Trusts, except certain grantor-owned trusts, IRAs, Exempt Organization Business Income Tax Returns
- Real estate mortgage investment conduits
- Non-profit organizations
- Farmers’ cooperatives
- Plan administrators
What are the Benefits of Having an EIN?
There are several reasons to have an EIN, even if you’re not required to have one in Massachusetts.
- If you have no employees but may hire some at some point, an EIN allows you to do so. You will need it to set up your payroll and the IRS will use it to track your payroll taxes. You will also need it to file your state employer taxes.
- It gives your business a separate identity from you, helping you keep your personal and business finances separate.
- An EIN allows you to open a business bank account, which, again, helps separate personal and business finances and accounting. You will also have access to other business banking services, such as a business credit card or a small business loan.
- Just as your personal credit is tracked by your social security number, your business credit is tracked by your EIN. Having an EIN allows you to build a business credit history.
- You can reduce your risk of identity theft by not using your social security number for business purposes. As a sole proprietor, with an EIN you’re not required to give your social security number to vendors and clients, increasing your privacy and security.
What Information Do I Need to Get an EIN in Massachusetts?
Here are the IRS requirements for obtaining an EIN:
All EIN applications (mail, fax, electronic) must disclose the name and Taxpayer Identification Number (SSN, ITIN, or EIN) of the true principal officer, general partner, grantor, owner or trustor. This individual or entity, which the IRS will call the ‘responsible party,’ controls, manages, or directs the applicant entity and the disposition of its funds and assets. Unless the applicant is a government entity, the responsible party must be an individual (i.e., a natural person), not an entity.
You will need your business formation date and the legal name of your business as well as the following:
- Your DBA name if applicable
- The name, title, and social security number of the managing member or owner
- The business address
- The state that you’re registered in
- Your reason for applying
- Your main business activity
- Your products/services
- The closing month of your accounting year
- Your contact phone number and email
How to File for an EIN Number in Massachusetts?
The application for an EIN in Massachusetts is free and can be found on the IRS website. The application is form SS-4, and it can be printed out and mailed to the IRS, or submitted electronically.
Once your information on the application has been validated, your EIN is assigned immediately. The EIN will never expire and is never duplicated, even if you go out of business.
How Much Does it Cost to Get an EIN in Massachusetts?
An EIN is a federal number, and is free of charge, regardless of which state your business is in.
Read also: EIN Lookup: How to Find Your Business Tax ID Number