Starting a business in the United States can be an exciting journey, especially with its dynamic economic environment and investor-friendly policies. However, the process of company registration in USA involves several legal and administrative steps. One common question among entrepreneurs, especially international founders, is whether an Employer Identification Number (EIN) is required to register a company in the USA. In this blog, we’ll break down what an EIN is, when it’s needed, and how it fits into the broader framework of USA company registration.
What Is an EIN?
An EIN, or Employer Identification Number, is a nine-digit number issued by the Internal Revenue Service (IRS). It is essentially the business equivalent of a Social Security Number for individuals. It is used for tax reporting purposes, identifying business entities, and handling employee payroll.
The EIN is also referred to as a Federal Tax Identification Number. It plays a central role in the ongoing operations of a company, including opening business bank accounts, filing tax returns, hiring employees, and applying for business licenses.
Is an EIN Required to Register a Company in the USA?
The straightforward answer is: No, you do not need an EIN to initially register a company in the USA.
Let’s unpack this in more detail:
Step 1: Company Formation
When you go through the process of company registration in USA, the first step is to choose a legal structure such as a Limited Liability Company (LLC) or Corporation (C-Corp or S-Corp). You then select a state in which to incorporate, as laws and fees vary from state to state.
At this stage, you will need to:
- Choose a business name
- Appoint a registered agent
- File Articles of Incorporation (for corporations) or Articles of Organization (for LLCs)
- Pay the state filing fee
None of these steps require an EIN. So, technically, you can incorporate a company in the USA without first obtaining an EIN.
Step 2: Post-Incorporation Requirements
Once your company is legally registered, several post-incorporation tasks need to be completed. This is where the EIN becomes essential.
Here’s when you typically need an EIN:
- To open a business bank account in the USA
- To apply for business licenses and permits
- To hire employees and run payroll
- To file federal and state tax returns
- To register for sales tax (if required)
- To enter into certain contracts or agreements with U.S. vendors
In essence, while you don’t need an EIN to form your company, you will need one almost immediately after the formation to conduct business activities legally and efficiently.
Who Needs an EIN?
Not all businesses require an EIN, but most do. Here’s a breakdown of who needs it:
- LLCs with more than one member: Required
- Single-member LLCs: Optional unless hiring employees or required for banking/tax purposes
- Corporations (C or S): Required
- Partnerships: Required
- Sole proprietorships: Optional unless hiring employees or required by banks
If you are a non-resident or foreign founder planning USA company registration, obtaining an EIN is crucial because most banks and financial institutions will not allow you to open a business account without it.
How to Apply for an EIN
Applying for an EIN is relatively straightforward and free. You can apply in several ways:
- Online (For U.S. Residents):
The IRS allows U.S.-based applicants to apply online and receive the EIN immediately. - Fax:
You can send Form SS-4 via fax and receive your EIN within four business days. - Mail:
Mailed applications may take up to four weeks. - Phone (For International Applicants):
Foreign applicants without a Social Security Number (SSN) can call the IRS at +1-267-941-1099 to apply by phone.
When filling out Form SS-4, foreign applicants who do not have an SSN or ITIN can write “Foreign” in the relevant field. The IRS does not require an SSN for issuing an EIN to a foreign individual or entity.
Also Read: What does the Florida LLC setup mean?
When Should You Apply for an EIN?
Although not required for the initial company incorporation in USA, it is advisable to apply for your EIN immediately after registration. This is because several subsequent steps depend on it, such as:
- Opening a U.S. business bank account
- Setting up accounting and payroll systems
- Complying with federal and state tax requirements
The sooner you obtain the EIN, the sooner you can move forward with launching and running your business operations.
EIN vs. ITIN vs. SSN
Many new business owners, especially from outside the U.S., get confused between these different types of identification numbers:
- EIN (Employer Identification Number): Used for businesses
- ITIN (Individual Taxpayer Identification Number): Used for individuals who are not eligible for a SSN but need to file taxes
- SSN (Social Security Number): Used for U.S. citizens and permanent residents
To register your business, only the EIN is relevant, but you may encounter the others during related processes like tax filing or banking.
Common Misconceptions About EIN and Company Registration
Myth 1: You Need an EIN Before Incorporating
This is false. The EIN is obtained after your entity is legally formed at the state level.
Myth 2: You Can’t Get an EIN Without a Social Security Number
Also false. The IRS issues EINs to foreign individuals and companies without a U.S. SSN.
Myth 3: Getting an EIN Means Your Business is Registered
Obtaining an EIN does not mean your business is legally registered with a U.S. state. EIN and business registration are separate processes.
Also Read: What are the Documents Required for Dubai Business Registration
Final Thoughts
To summarize, while you don’t need an EIN to register your company in the USA, you will likely need one soon after for essential business operations. Think of company registration as the first legal step, and obtaining an EIN as one of the immediate next steps to get your business up and running.
Whether you’re a U.S. resident or an international entrepreneur, understanding the role of the EIN is crucial for successful company registration in USA. It’s a foundational requirement for everything from banking to compliance, so make sure you plan for it early in your business journey.
FAQs
1. Can I open a business bank account in the USA without an EIN?
Most U.S. banks require an EIN to open a business bank account. There are very few exceptions, and even those often require an SSN or ITIN.
2. How long does it take to get an EIN from the IRS?
If you’re eligible to apply online, you can receive your EIN immediately. Fax applications typically take four business days, while mailed applications may take up to four weeks. Foreign applicants can apply via phone and usually get the EIN during the call.
3. Do foreign nationals need a U.S. address to get an EIN?
No, a U.S. address is not required. However, you will need to provide a mailing address (domestic or international) for IRS correspondence.
