How a Startup Registers a Business and Gets a Free IRS EIN

The founder protects the business name, registers the company with a state office, appoints a registered agent and then applies to the IRS for an Employer Identification Number, or EIN. The order matters, and each step has its own conditions.

The Small Business Administration and the Internal Revenue Service both publish guidance on these steps. The sections below draw on both agencies’ pages and explain what each step requires, what it costs and what it makes possible.

Check the Business Name Before Filing

The SBA describes four ways to register a business name, each serving a different purpose. A business can rely on a state entity name, a federal trademark, a doing-business-as (DBA) trade name or a domain name. The SBA recommends checking any proposed name against the USPTO trademark database.

A state entity name protects the name at the state level, and most states will not register a name that another party already holds. A federal trademark protects the name, goods and services nationally. The SBA notes that trademark infringement lawsuits can be costly, so it advises checking prospective names first. A domain name protects the website address and must be renewed on a regular basis through a registrar service.

A DBA does not provide legal protection on its own, the SBA says. Most states require registration if a business uses a DBA, and several businesses can share the same DBA within one state. Requirements vary by business structure and by state, county and city, so founders should confirm the rules where they operate.

What an EIN Costs
The IRS says its online EIN application is free and warns against websites that charge a fee for one.

Register the Entity With the State

Most states require registration with the Secretary of State’s office, a Business Bureau or a Business Agency. The SBA says the documents depend on the business structure. An LLC files articles of organization, and the SBA recommends an operating agreement even where a state does not require one. A corporation files articles of incorporation, which every state requires. Bylaws or resolutions are widely recommended, even where a state does not mandate them.

In most cases, the SBA says, total state filing fees are under $300, and fees vary by state and business structure. A business that operates in more than one state may form in one state and foreign qualify in others by filing a Certificate of Authority. Many states also require a Certificate of Good Standing from the home state, and foreign-qualified businesses typically pay taxes and annual report fees in both states.

The IRS says that if a business does not form its entity with the state first, its EIN application may be delayed. The IRS advises forming a corporation or LLC through the Secretary of State before applying for the number.

Appoint a Registered Agent Before Filing

LLCs, corporations, partnerships and nonprofit corporations need a registered agent located in the state where they register. The SBA says the agent must be in place before filing, and many business owners prefer to use a registered agent service.

Registration rules differ from state to state. The SBA says ownership rules and filing requirements can vary by state and by business structure.

Apply for a Free EIN Online

The IRS says its online EIN application is free and open to domestic businesses and organizations. The organization must be formed or created in the United States or a U.S. territory, and its principal place of business must also be there. The IRS says the number is issued immediately if the application is approved. The SBA says applicants can receive it immediately through the IRS assistance tool.

The applicant must be the responsible party in control of the entity or an authorized representative. The application requires that person’s Social Security number or individual taxpayer identification number. A third-party designee can apply only with signed authorization.

The application must be finished in one session and cannot be saved. The IRS says it expires after 15 minutes of inactivity, and the applicant must start over. The online tool cannot be used for a business that already has an EIN, except for government entities, and the IRS limits applicants to one EIN per responsible party per day. The IRS warns against websites that charge a fee for an EIN, and says applicants never have to pay one.

Hours are listed in Eastern Time: 6 a.m. to 1 a.m. the next day Monday through Friday, 6 a.m. to 9 p.m. on Saturday, and 6 p.m. to midnight on Sunday. Businesses that cannot use the online tool, including those whose principal place of business is outside the United States, can apply by phone, fax or mail. The IRS says it faxes a cover sheet with the number in about 4 business days, and a mailed application takes about 4 weeks. Applicants can use the EIN immediately for most needs, but the IRS says to wait up to 2 weeks before TIN matching, e-filing or making electronic tax deposits.

The IRS says that if a business does not form its entity with the state first, its EIN application may be delayed.

Who Needs an EIN and What It Is Used For

The IRS lists employers among the businesses that need an EIN. That includes businesses with employees, businesses that must pay employment, excise, or alcohol, tobacco and firearms taxes, and anyone who withholds tax on non-wage income paid to a nonresident alien. The IRS also lists partnerships, LLCs, corporations, tax-exempt organizations, estates, trusts other than certain grantor-owned revocable trusts, retirement plans and IRAs, REMICs and farmers’ cooperatives.

A business that does not need an EIN for federal tax purposes can still request one for banking or state tax purposes, the IRS says. Once an EIN is in place, the IRS lists opening a bank account, applying for business licenses and filing a tax return by mail among its uses. The IRS also says EINs are not intended for state tax lien auctions, sales or lotteries.

The SBA says founders should apply for the EIN right after registering the business. The SBA also says a new EIN is generally needed when ownership or structure changes, and advises confirming that with the IRS. An EIN cannot be canceled, although the IRS can deactivate it under certain conditions. If an EIN arrives that the business did not request, the SBA says to confirm that no one requested it on the business’s behalf, then report it using the IRS Business Identity Theft Affidavit.

Licenses, Permits and Post-Registration Deadlines

The SBA says federal licenses depend on the activity. Alcohol sold at retail is handled by the Alcohol and Tobacco Tax and Trade Bureau, and local Alcohol Beverage Control boards also apply. Firearms, ammunition and explosives import is handled by the Bureau of Alcohol, Tobacco, Firearms and Explosives. Aircraft maintenance is handled by the Federal Aviation Administration.

State, county and city requirements also vary, and some licenses and permits expire and need to be renewed. Some states require a follow-up filing after the company is formed, such as an Initial Report or a tax board registration. The SBA says these are most often due within 30 to 90 days after state registration, and advises checking with the local tax office or franchise tax board.

Because local requirements vary, founders should check with local government offices for the rules that apply to their business. The DBA rules described earlier can also differ by county and city.

Photo: Marvel44 · CC BY-SA 4.0 · via Wikimedia Commons