Owning a business requires many important decisions and logistical steps, as well as meticulous planning. Millions of Americans every year found their own business, providing support and substance to their communities. Choosing the type of business, your business structure, and the location of your business are just of the few essential decisions you will need to make. Filing the necessary incorporation papers, tax documents, and permits with local government are examples of the logistical steps you must take. Most Minnesota business will also need to apply for an Employer Identification Number, or “EIN,” also sometimes called a “taxpayer identification number.”
An EIN is used by the IRS and the state of Minnesota to identify your business when you pay taxes. As your social security number is used as an identifying number for you when you personally file taxes, so your EIN is used to identify your business. You must make sure to register for an EIN before your business takes any of a variety of actions, including the following:
- have employees
- Sale or lease any items that are taxable in Minnesota or provide taxable services
- Sell or transport alcohol or tobacco products
- Issue insurance policies or are a licensed insurance company
- Sell medical or dental equipment or provide medical or dental services,
- Pay or file estimate income taxes
- File income taxes for a trust or an estate
In addition to using your EIN to file taxes, you will also need one when, for example, applying for lines of credit or opening a business bank account. Using an EIN is not only required in some instances, but can assist you in protecting your confidential information as on public business filings, you will use your EIN instead of your own social security number.
Applying for an EIN is not particularly complicated, as you can do so online, by fax, or by mail. However, it is important that you do not mistake the timing of when you should apply. If you are trying to form a corporation, partnership, LLC, or other business entity that requires application to the state, you should wait until you have approval for your business organization before applying for your EIN. This ensures that the EIN is attached to a valid business entity at the time it is issued.
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