Unlike a conventional corporation, an S-Corp is not required to have an Employer Identification Number (EIN) for filing taxes. Despite this, nearly every S-Corp still needs an EIN for other purposes.
S-Corps pass through their taxes to the owners. This means that the income, losses and debts will be reported under the shareholder’s tax returns, not the corporation’s.
What is an S-Corp?
An S-corporation is a legal structure for a business that operates like a normal corporation but is taxed like a partnership. This means it can avoid the double taxation paid by conventional corporations. Only smaller, private corporations can use this structure. It offers valuable liability protections for the owner(s) and can help with saving on Social Security and Medicare taxes.
However, unlike sole-proprietorships, partnerships and certain Limited Liability Companies, S-Corps must pay a reasonable employee compensation. In other words, the owners cannot forgo a salary from the company. This can be prohibitive for new businesses that may not have the capital yet to consistently pay a reasonable wage to the founders.
What is an EIN?
An Employer Identification Number (EIN) is a taxpayer identification number used by the Internal Revenue Service (IRS) and others to uniquely identify businesses. Most businesses need to have an EIN. If your business meets any of the following criteria, you will need to apply for an EIN.
- Your business has employees.
- You want to open a bank account or credit card in your business’ name.
- You want to apply for local/regional permits and licenses.
Many S-Corp owners also apply for EINs to be prepared for the event of losing their S-Corp status. Between this and the above criteria, in nearly all practical situations, S-Corps need an EIN.
How to Apply for an EIN Online
If you need an EIN for your business, take advantage of GovFocFiling.com’s convenient services. To apply for EIN online, simply select your entity type, complete the application, and pay the one-time fee for one-hour processing.
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