One of several steps most businesses will need when starting a business in California is to register for an Employer Identification Number (EIN) and California state tax ID numbers. These numbers are most commonly used to register a business with the federal and state government in order to pay sales taxes, payroll taxes, and withhold taxes from employee wages.
Let’s review in more detail what these numbers are used for, when they are required, costs and how to get them.
What is the Employer Identification Number (EIN)?
The EIN is short for Employer Identification Number and is sometimes referred to as the FEIN or Federal Employer Identification Number. This is a unique 9 digit number that is similar to a social security number for an individual but instead identifies a business.
The EIN is primarily needed to hire employees, as the EIN used as the account for paying payroll taxes, income tax withholdings, and unemployment taxes.
Some other uses of the EIN include:
- Opening a bank account – Banks need an EIN (or SSN if the EIN isn’t needed) before opening a business bank account.
- Applying for business licenses & permits – Most California business licenses and permits will require the EIN (or SSN in some cases) before filing an application.
- Filing tax returns – To file state and federal tax returns, the EIN is used to identify the business.
Who needs a California EIN?
The EIN is needed for California businesses that are either:
- Registered as a partnership, corporation or multi-member LLC, or;
- A sole proprietorship or single-member LLC that has employees
The EIN is optional for sole proprietorships and single-member LLCs without employees as those business entities will use the owner’s social security number.
How to apply for an EIN
The easiest and fastest way to apply for an EIN is to visit the Internal Revenue Service (IRS) website, between the hours of 7 am – 10 pm EST, Monday – Friday.
It takes about 5 minutes to file the EIN online a number will be ready in seconds. If applying online isn’t an option, you can also apply by mail or fax by sending the SS-4 form. You can even get an EIN over the phone if the company was formed outside the U.S. by calling 267-941-1099. If filing by phone, note that it isn’t a toll-free number.
There is no cost to apply for an EIN.
See how to register an EIN in this video:
What Information Do I Need to Get an Employer Identification Number?
Applying for an EIN is pretty straightforward, but you will need to obtain some information beforehand, such as:
- Legal business name
- Business address
- Name(s) of the principal officer, manager or owner
- Name(s) and contact information of the owners, directors, officers or members
- Type of business and what activities the business performs
- Date the business was started or acquired
- Closing month of the entity’s accounting year
- Number of employees expected to be hired
- Contact information
What state tax numbers are needed?
In addition to registering the EIN, many businesses will also need to get state of California tax numbers in order to pay for a variety of state business taxes.
Business tax numbers in California are often confused with the Employer Identification Number. The EIN is a separate number that is used to federally register a business with the Internal Revenue Service (IRS) and may be needed in addition to state tax numbers. The most common reasons a business in California will need to register for a state business tax numbers include:
- Sales Tax – Businesses selling products and certain services are required to collect sales taxes and will need to register with the California Department of Tax & Fee Administration. Learn more about registering for a California sales tax number.
- Employees – Businesses with employees will need to register with the California Employment Development Department to get a Withholding Tax Number and Unemployment Number to pay for payroll taxes. Learn more about registering as an employer in California.