Do I Need an EIN for a C-Corporation?
A C-Corporation is a type of business structure that allows owners to limit their personal financial and legal liabilities. C-Corp tax uses double taxation, which means the owner pays taxes at both the business and personal levels. However, they also have the ability to reinvest the profits in the company using a lower corporate tax rate. Most corporations fall into the C-Corporation category.
The Difference Between a C-Corporation and an S-Corporation
Now that you understand the answer to “what is a C Corp,” it’s important to understand how it differs from an S-Corporation. Like a C-Corporation, an S-Corporation is a separate business entity that offers limited liability protection. Both require filing formation documents with the state and both operate using directors, officers and shareholders. The differences fall in taxation. S-Corporations are known as pass-through tax entities. This means they use Form 1120S, which is an informational federal return. S-Corporations do not pay taxes at the corporate level but the owners pay them on personal returns. Whether you should apply for S-Corp or C-Corporation depends on your personal needs and preferences.
C-Corporations and EIN Guidelines
Current tax laws require all C-Corporations to obtain an Employer Identification Number. EINs are nine-digit numbers that work much like your personal social security number does. The ID number is a unique identifier that makes it possible for the business owner to acquire credit, pay taxes, enter into contracts, incur debts and perform other essential tasks in the company’s name. Employer Identification Numbers make it possible to hire employees, open company bank accounts, establish a Keogh plan and more. Without one, your business cannot operate legally.
You could head to the local Internal Revenue Service office or send in your EIN application via mail, but many business owners are choosing to file for an EIN via the internet. GovDocFiling can help you begin your application now. All you need to do is answer a few questions about your business. Most applicants receive their federal tax ID in a matter of days.
According to current tax law, it is legally required for all C-Corporations to obtain an Employer Identification Number (EIN), also known as a Federal Tax ID number.
The Internal Revenue Service (IRS) assigns these nine-digit numbers to identify various types of businesses, and individuals that will be required to file business-related taxes.
In addition, an EIN is an important tax ID number that will help your business complete numerous tasks that are essential.
Why Do I Need an EIN for a C-Corporation?
For tax purposes, C-Corporations are treated like individuals and therefore require a distinct type of identification. EINs are like social security numbers for businesses. Since a C-Corporation can incur debts, acquire credit, pays taxes, and enter into contracts, it is therefore necessary for the corporation to have an ID number unique to the business.
This is why EINs are mandatory for C-Corporations. EINs are also required (or highly recommended) for other types of business entities, including partnerships, and when/if a business ever hires employees.
EINs help businesses do all kinds of things, some of which include:
- Opening a bank account in the name of the business
- Hiring employees
- Establishing a Keogh plan
- Acquiring credit in the name of the business
- Conducting business with various types of organizations including nonprofits, trusts, famers’ cooperatives and IRAs, to name but a few
How to Apply for an EIN
The easiest way to apply for an EIN online, is by working with us. We fill out the forms and make it simple to file and don’t take much time at all. Plus, online filing can give you results in as little as a few hours. You could also file by phone, fax, or traditional mail, but these filing processes obviously require more time.