To consumers who don’t have the responsibility of running a business, the ins and outs of business banking probably remain a mystery. After all, even those of us who have already made the decision to start our own businesses encounter plenty of questions and obstacles along the way. For example, if you’re in the early stages of getting a new venture off the ground, you might already be wondering how to get a business bank account.
It’s a natural concern, especially since money management is so fundamental to the health of your company. One particular question that many new business owners encounter is the role that a federal Employer Identification Number (EIN) plays in your business checking account. Is this really a necessary step to create a business bank account, and if so, how do you get an EIN? Let’s investigate.
What Is the Purpose of an EIN?
Before we address those questions, let’s first establish what an EIN is and why you may or may not need one. The primary function of an EIN is as an identifying number for businesses for tax purposes. As such, EINs are issued by the Internal Revenue Service (IRS), and they function like a business version of an individual’s Social Security Number (SSN). Just as each person has their own unique SSN for use on taxes and other federal paperwork, an EIN fulfills the same role for a business entity.
Businesses of all kinds use an EIN to officially separate their business interests from their personal ones, including sole proprietorships, corporations, nonprofit organizations and government agencies. Essentially, if a business has employees, operates as a partnership or corporation or meets other select criteria, an EIN is required by law. Even trusts, estates and other less obvious entities should have EINs. The biggest exception lies with self-employed individuals: Since they operate independently and have no employees, they may opt to use their SSN rather than acquiring an EIN for tax purposes.
Although an EIN is useful for a variety of other activities, it is necessary for filing any kind of business taxes, including federal income tax forms, state taxes and employment tax forms. You also need an EIN to file federal taxes online through the Electronic Federal Tax Payment System. Non-tax applications run the gamut from applying for a business license to opening a business bank account. Now that you know what an EIN is used for — and that you do in fact need one to legally manage your finances, including any business bank accounts you hold — let’s look into how you can get an EIN for your business.
How to Apply for an EIN Right Now
As is often the case in today’s age of technology, the easiest way to secure an EIN for your business is to head straight for the internet. With a quick visit to the IRS website, you’ll be able to get started on your EIN application using these steps:
1. Determine Eligibility
Before you do anything, you’ll need to determine your eligibility to apply for an EIN. Your principal business needs to be located in the United States or its territories, and whoever completes the application needs to already have a valid Taxpayer Identification Number (an SSN, Individual Taxpayer Identification Number, etc.). You can apply for as many EINs as you like in total, but there is a limit of one per person per day.
2. Complete Application Details
Once you begin your application, you need to complete it in one session. You can’t save your progress or return to it another day, so be sure you have enough time to focus on the task at hand. Moreover, your session expires after just 15 minutes of inactivity. You won’t have time to scrounge around for any information you might need — have all your business details ready to go before you sit down.
3. Finalize Submission
Provided you meet the necessary criteria and have the correct information, you won’t have a lengthy waiting period to receive your new business identification — you’ll get it immediately after you submit your application. From there, you will be able to download, save and print your EIN confirmation notice as proof that your business is recognized as its own entity in the eyes of the IRS and the federal government at large.
What You Need for a Business Checking Account
Now that you have your EIN, are you all set to secure your business checking account? Not so fast. An EIN is a key ingredient in your business bank account, but it’s far from the only one you need. Of course, the ultimate goal is to prove that you run a legitimate business in which everything is above-board. Here’s what the bank will be looking for:
- Your licenses: Depending on your industry, you may need multiple licenses, especially if you interact directly with consumers. In any case, you should seriously consider getting a business license as one of the first steps to giving your company the legitimacy you crave.
- Your fictitious name (if applicable): Whenever you start your own business, you need to know what to call it. If you use one, your DBA name — literally short for “doing business as” — needs to be nailed down before you apply for a business checking account since the bank will want to keep the name consistent in all your paperwork.
- Your business address: To establish a new bank account, you’ll need a business address on file. So when you head to the bank, be sure to bring along proof of your address. Usually, any official document — such as a utility bill — will be enough to legitimize your address.
Get Your Business Bank Accounts
By now, you have a better understanding of what an EIN is, how it works, how to get it and what else you need to have before you open a business bank account. Once you have a relationship with a business bank, you might want to start opening relevant accounts, like checking and savings. Before you decide which account would best suit your business, take a look at our guide to finding the right one for you.
If you still have any questions about EINs or business checking, feel free to reach out to us directly. You can also join the conversation or just share your thoughts, comments or questions with us on Twitter over @Revenued_com.
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