What is a fein?

FEIN stands for Federal Employer Identification Number. It's a unique nine-digit number assigned by the Internal Revenue Service (IRS) to businesses operating in the United States. Think of it as a business's Social Security Number.

Here's what you should know about FEINs:

• Purpose: The primary purpose of a FEIN is for tax reporting. Businesses use it to file various tax returns, including employment taxes (like payroll taxes), excise taxes, and income tax returns for corporations and partnerships.

• Who needs one?: Many types of businesses need a FEIN, including:

  • Corporations: All corporations, regardless of size or structure, require a FEIN.
  • Partnerships: Partnerships generally need a FEIN.
  • Limited Liability Companies (LLCs): LLCs may or may not need a FEIN depending on their structure and the number of members. Single-member LLCs that are disregarded entities may use their owner's Social Security Number.
  • Sole Proprietorships: Sole proprietorships generally don't need a FEIN unless they have employees or operate as a corporation or partnership.
  • Nonprofit organizations: Nonprofits usually require a FEIN.
  • Businesses with employees: Even if you're a sole proprietor or partnership, you'll need a FEIN if you hire employees.

• Obtaining a FEIN: You can apply for a FEIN online through the IRS website (the easiest and fastest method), by phone, or by mail. The application process is relatively straightforward, and the IRS usually provides the number immediately upon completion of the online application.

• Importance: Having the correct FEIN is crucial for legal compliance and avoiding penalties. Incorrect or missing FEIN information on tax returns can lead to delays and potential fines.

In short, a FEIN is a vital identification number for businesses in the US, essential for managing taxes and complying with IRS regulations. If you're starting a business, determine if you need a FEIN early in the process.