Once you have handed in your registration papers, you will not quite be ready to set up shop. Instead, you need to make sure you have righted things with the authorities by getting your permits and licenses. As you do so, you may come across the term EIN and wonder what this is and if you need to obtain an EIN number. We will cover what should you do if you need to get one when starting a business in Michigan and how you can register for an Employer Identification Number (EIN).
What is the Employer Identification Number (EIN)?
Think about how the government sees you as an individual. At some point in your life, you get a number which the authorities use to gauge your good standing, known as an SSN. It makes work easier for the authorities when differentiating one person from the other. While you may share names with other people, you do not share IDs. The same goes for the business. All Michigan businesses have unique identifiers which enable the government to track their activities for tax and filing purposes. The EIN, a nine-digit number, is one such identifier often used by businesses in their dealings with the government.
Who needs an EIN?
You must apply for an EIN if:
- You do not own your Michigan LLC alone, i.e, you have other owners in the business;
- You want to hire people to help you with running the business.
If your limited liability company falls into any of these categories, you have no choice but to adhere to the government regulations by the IRS.
Benefits of having an EIN for your Michigan LLC
Not every business needs to have this ID, and you may wonder if getting it comes with any perks. Why, yes! Having an EIN enables you to:
- Run a business bank account to operate in the state of Michigan: You probably know that by virtue of having an LLC, you enjoy a great deal of personal liability protection. However, you may not know that mixing your personal and business funds can weaken this protection. Having a separate account goes a long way in cementing the corporate veil. You will find that most banks, though, require that you provide them with a business ID for you to open an LLC business bank account suited for business needs. In such a scenario, having an ID would be to your benefit!
- File your federal, state, and local taxes and track your payments by having a standard point of reference.
- Access more business loans and credit by proving your credibility to creditors, suppliers, and other people. A business ID makes you look professional and serious about your work and attracts more people to deal with you.
- Get business licenses. Some authorities require that you show them a business ID before they can permit you to operate in specific industries.
How to Get an EIN
While it may seem like a hard task, getting this ID is straightforward. All you need is the information that you will have already included in your registration documents. It includes:
- The name of your business that must be in line with the guidelines set out by the state.
- The location of your business and the name and contact information of the principal manager or owner.
- The type of operations you will run and the industry in which you will operate.
- When you started the business. Please note that you cannot make an application until the authorities have okayed your registration paperwork. Otherwise, you can still get an ID that would not be tied to any business and would not be valid. You would end up going over the whole process again. Instead of this back and forth, wait until you have formal approval and indicate the date of this approval on your application.
- When your fiscal year will end (when you will compile your official accounting records).
- If you hire employees, and if so, how many you will have in the business.
- Where the authorities can reach you if necessary.
To file for an EIN number, you will have a variety of options available to you, including:
Online
Applying online is not only convenient but also the easiest and fastest way to file your application. You can access the official website any time from 7 in the morning to 10 at night on weekdays, EST time. Once you key in the details and move to the last stage, the site will immediately issue you a number. That is what you will use now and in the future. A few weeks later, the Internal Revenue Service (IRS) will send a confirmation letter which you can use for official purposes. Please note that this method only works if you have not used it in the past and have a valid taxpayer number. If not, you will need to consider other options to get an EIN online.
By Mail
If an online application cannot work for you or you prefer to use the old school method, you can complete Form SS-4 and send the hard copy application to:
Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999
It will take about four weeks for the processing to be complete. However, if you are not in a rush or cannot access any other faster method, you will have to make do with this EIN number LLC option.
Fax
Other than mailing in your Form SS-4, you also have the option to fax it to the authorities. It takes about four days to process and is available throughout the week at any time, making it much more convenient than mailing. You can send the complete form to:
855-641-6935
You may have noticed that there is no mention of a fee in any of these cases. That is because obtaining an EIN number is completely free. While some online services often charge a fee to complete an EIN application, you can easily avoid the added costs by doing it yourself if you have the time.
Is an EIN the same as Michigan State Tax ID?
It is easy to mistake your federal tax number as being the same as your state tax number. However, these are two separate identifiers. Getting an EIN enables you to report your income and manage your employee payroll on a national level. However, it does not cater to what you owe your individual state. As such, once you have sorted out your national business, you also need to come down to the state level and understand what ID you need to get.
The options depend on the kind of operations you run. For example, if you deal with physical goods, you will require a sales tax ID. It enables you to collect monies on behalf of the state, which you remit to the authorities periodically. Also, if you plan on hiring people to help in your business, you will need to get an ID for this. It enables you to contribute to unemployment insurance and employee income tax withholding and ensures that the state is aware of anyone benefitting financially from your organization.
Please check with your state on what you will need based on your current operations. Operating without acquiring these IDs can not only cost you fines and penalties but can also lead to the shutdown of your business. It is not worth the risk.