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If you recently launched a startup, you may be thinking about getting an EIN. This number makes it easier to run your company and gives you access to more resources. While it’s a nice perk for some business owners, it’s required in other industries. This guide will explore how EINs work and how long it takes to get your application approved.
What is an EIN?
An EIN is a 9-digit number attached to your business. It’s your company’s version of a Social Security Number and results in business taxes. While no one looks forward to business taxes, an EIN offers several benefits, such as access to business loans and the ability to separate your personal assets from your business assets.
Many business owners get started with personal loans and use their personal credit scores to access additional capital. However, the resources you can obtain when you lean on personal credit aren’t sufficient as your startup continues to grow. An EIN becomes necessary at a certain point, and you may need it very early in your journey, depending on the type of business you operate.
Processing time for EIN applications
The processing time for EIN applications depends on whether you apply online, by mail, or via fax. Online applications have the quickest processing times, while mail applications take the longest.
Online EIN application
An online EIN application’s processing time is by far the quickest. You can receive an EIN immediately after you submit an online application. Your principal business must be located in the United States or U.S. Territories to apply for an EIN. You must also provide a valid taxpayer identification number during the application process (SSN, ITIN, and EIN are viable options). You can use an EIN from one startup to help with the application for another startup’s EIN.
EIN application by mail
If you mail a completed Form SS-4, you will have to wait 4-5 weeks to receive an EIN. You can mail your form to the following address:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
Business owners with no legal residence, principal place of business, or principal office or agency in any state have to mail their application to the following address:
Internal Revenue Service
Attn: EIN International Operation
Cincinnati, OH 45999
EIN application by fax
EIN applications by tax take a week to process, but it can take an additional week if you do not include a return fax number. You will have to fax Form SS-4 to the following number, depending on where you are located:
- Fax number if you are within the U.S.: 855-215-1627
- Fax number if you are outside the U.S.: 304-707-9471
Factors affecting the timeframe for EIN approval
The timeframe for EIN approval depends on several factors. Knowing what goes into the approval process can lead to a quicker decision and a higher chance of getting approved.
How you submit your application
You will receive an update much quicker if you submit an online application than if you submit an EIN by fax or mail. If you can, it’s often a good idea to apply for an EIN online.
The form’s accuracy
Any inaccurate information on your Form SS-4 will delay the process. Those delays aren’t a big deal for online applications, but a single error can increase your wait time by multiple weeks if you submit your application via mail or fax.
The existence of a similar company
If you file your business name as “Apple” and try to get an EIN, your application will get rejected. While business owners know not to use the same name as major corporations, the IRS will see if any company with an EIN has the same name and industry as yours. The IRS wants to make sure it’s easy to distinguish companies apart instead of allowing multiple companies to operate with the same name.
The responsible party
Your application can get rejected if the agent labeled as the “responsible party” is an agent for a separate online EIN application. If the agent is already designated as a responsible party on another online application, you will have to submit your EIN via mail or fax.
Is it worth getting an EIN?
An EIN allows you to build business credit, which will make it easier to apply for business loans and lines of credit. While you can get personal loans, you can borrow much more money from a small business loan. For instance, you can borrow up to $5 million from a U.S. SBA loan.
An EIN grants other perks, such as the ability to hire employees and minimize the risk of identity theft. If you do not have an EIN and offer a service, you will likely have to provide your Social Security Number in lieu of an EIN. It’s also free to apply for an EIN, so you don’t have to worry about making a big investment to get a 9-digit identification number for your business.
This 9-digit number makes sense for many companies. Some business owners require this number to reach the next level in their business growth.
Get the Ramp card without making a personal guarantee
One of the reasons business owners go through the effort of getting an EIN is to protect their personal assets. That way, they can keep their retirement portfolios intact if the business gets involved with a lawsuit or can’t make loan payments.
However, many small business lenders and credit card providers require a personal guarantee. This guarantee pops the corporate bubble and puts your personal assets on the line if your company cannot repay its debt.
The Ramp corporate card is a viable solution that does not require a personal guarantee. You don’t even have to provide a Social Security Number, but you will need an EIN. The Ramp corporate card has no preset credit limits and offers 1.5% cashback on purchases. You can give Ramp a try to see if it is right for your business.