Do EINs Differ Between Each State?
EIN stands for employer identification number. It is also sometimes known as a tax ID number or taxpayer ID. Because the EIN, or tax ID, is used for federal tax purposes, it stays the same from state to state. Some states require a separate state tax ID, however, to pay state-specific taxes. Moving the business to another state does not change the EIN— the business keeps the same EIN during the entire life of the business. If a business has employees or will have employees in the future, the business owner must apply for an EIN for that business. Even if a business does not have employees, but is a partnership, an EIN might be required.
The EIN is a way for the IRS to uniquely identify your business, much like a social security number uniquely identifies an individual who pay taxes. It is necessary in order to do the tax paperwork for a business entity. Some examples of business entities that require an EIN include:
- Non-profit associations
- Estates of decedents
- Corporations
- Partnerships
Also, for those who have previously obtained an EIN, it is possible that applying for a new EIN number would be required if changes take place concerning the organization or ownership.
Obtaining an EIN is a necessary process for most types of businesses. Business owners need the application for their EIN to be completed before starting their business or if they are trying to establish a new business. They will also need an EIN in order to establish credit, receive funding or hire employees.
State-Level Employer Identification
States use the federal EIN for tax reporting purposes, because it provides seamless communication with the federal government when verifying business information like reported federal taxes. For that reason, there is no difference in EIN from state to state that would affect your business. If your company has an EIN based in one state, they can operate in any state.
Sometimes, there are state-level laws that require out of state employers to provide additional information to their tax reporting agencies to properly determine and pay their tax obligations, but that company’s federal employer identification number is valid for all those required records, so it should be easy to establish your business in each new state you expand to.
Splitting Your Business? Forming a New Company?
Sometimes, it makes sense to spin a new company off an old one. It can happen when you want to take advantage of a particular market with a new brand or when you are looking to move into a new sector of business without diluting the focus of your core company. Whether you set your business up as a company owned by private individuals or one that is wholly owned by another corporation, the new company will need an EIN.
The same is true if you start a second business that is not related to your first. That is because:
- The EIN is attached to the business, not the individual
- Unrelated businesses with the same owner have no shared tax reporting obligation
- The IRS needs to track individual tax payments for every business entity
All of that means whenever you are starting up a new business, you need a new EIN for it. Those businesses can expand to operations in multiple states without needing a new EIN, but if they split into multiple separate entities, each of those will need its own.
Applications for EIN can be filled out online through the IRS website or by phone, fax or mail. However, you can contact GovDocFiling here to handle the paperwork for you!