Well, it seems that you have made up your mind to start a nonprofit organization.

You may be motivated by a desire to solve a societal problem, or a certain event in your life might have sparked your drive to make a difference in your community.

Either way, you’re pumped and ready to get started and do something for society. That’s an awesome thought. Kudos to you.

Now, as you dive into the nitty-gritty of setting up your nonprofit organization, you’ll quickly realize there’s one crucial thing everyone keeps mentioning: obtaining an EIN.

An Employer Identification Number (EIN) is like a Social Security number for your nonprofit. The IRS and other government agencies use it to identify your organization. 

Whether you have employees or not, your nonprofit needs an EIN to operate legally and efficiently.

But why is this little number so significant? And why does everyone you go to for help insist on getting an EIN as soon as possible? 

In this guide, we’ll break down why an EIN is essential for your nonprofit, how to get one, and the special considerations to keep in mind. 

By the end, you’ll see why this seemingly small step is vital for your nonprofit’s success and how to navigate the process smoothly. 

Ready? Let’s dive in!

What Is an Employer Identification Number?

Your organization’s EIN is a unique identifier that the IRS and other government agencies use to recognize your organization.

It’s a simple nine-digit number in the format XX-XXXXXXX, but no two nonprofits or businesses share the same number.

Despite its name, an Employer Identification Number (EIN) is really just a tax identification number used by the IRS for any organization, regardless of whether it has employees.

An EIN is critical to running a nonprofit smoothly and legally. It helps you comply with tax laws, simplifies everyday operations, and can boost your credibility with donors and grantors. 

So, whether you’re starting a new nonprofit or managing an existing one, getting an EIN should be high on your to-do list. 

Though it’s a small step, it can save you a lot of headaches down the road.

What’s the Purpose of an EIN for Nonprofits?

The main job of an EIN is to track your nonprofit’s tax responsibilities. Whether you’re handling donations, managing payroll taxes, or filing tax returns, the EIN is your go-to number. 

Here’s a quick rundown of why your nonprofit needs one:

Receiving Donations: Donors need your EIN to claim tax deductions for their contributions.

Applying for Tax-Exempt Status: To get recognized as a tax-exempt organization, you need an EIN when you file for 501(c)(3) status with the IRS.

Filing Tax Forms: Even nonprofits have to file certain tax forms, like the 990 series, and an EIN is required for that.

Hiring Employees: If your nonprofit has or plans to have employees, you’ll need an EIN to handle payroll taxes.

Opening a Bank Account: Most banks require an EIN to open an account under your nonprofit’s name.

Applying for Grants: Many grant applications require an EIN to verify your organization’s legitimacy.

Establishing Credit: An EIN helps separate your nonprofit’s finances from your personal finances, which is crucial for building a strong financial foundation.

Vendor Relationships: If you’re dealing with other businesses or contractors, they might ask for your EIN for tax reporting purposes.

Credit Applications: Applying for a credit card or line of credit for your nonprofit? Lenders will use your EIN to pull your organization’s credit report.

Who Exactly Needs an EIN?

Let’s break it down with some clear examples.

💰 For-Profit Businesses

Businesses with Employees: If your business hires employees, you’ll need an EIN to manage payroll taxes and report employee income to the IRS.

Corporations and Partnerships: Even if you don’t have employees, operating as a corporation or partnership requires an EIN. This helps in tax filings and establishing business credit.

Trusts and Estates:  If you manage a trust or an estate, an EIN is necessary for tax purposes.

Sole Proprietors: While not always required, having an EIN can be beneficial for sole proprietors, especially if you plan to hire employees, open a business bank account, or apply for business licenses.

🌎 Nonprofit Organizations

Incorporating as a Nonprofit: If you’re incorporating as a nonprofit, you’ll need an EIN. This is a key step in establishing your organization’s legal identity.

Applying for Tax-Exempt Status: To be recognized as tax-exempt under section 501(c)(3) of the IRS code, you must have an EIN. 

This allows you to receive tax-deductible donations.and there are even services out there that can handle the whole process for you if you’d rather not deal with it yourself.

The EIN Application: What’s The First Thing You Should Know

Starting a new nonprofit and feeling overwhelmed by all the paperwork? 

But don’t worry. Applying for an EIN (Employer Identification Number) isn’t as daunting as it might seem. 

In fact, it’s pretty straightforward, with fewer steps. And here’s the best part: applying for an EIN through the IRS is completely free. 

That’s right — no hidden fees, no surprise costs. You won’t need to shell out money for legal or accounting help just for sending your EIN application form to the IRS.

Of course, there are times when expert advice is needed, when you’re crunched for time, swamped with NGO work, or just have a small team. 

In these cases, bringing in some advisors and consultants on board can make the process smoother and free up your time to focus on your noble mission.

We have an entire blog on how to apply for an EIN. Please check it out at your leisure. We are pretty sure it will clear up some of your doubts about EIN.

​​Special Considerations When Applying for an EIN

Gathering all the necessary information and understanding the requirements is crucial before tackling the EIN application process.

Here’s a detailed guide to ensure you’re well-prepared.

#1 Basic Information You’ll Need

First things first, you’ll need to collate some basic info about your nonprofit. Don’t worry it’s not any heavy paperwork.

Here’s the checklist of what you’ll need.

💡  Legal Name of Your Organization: Make sure you have the exact name that’s registered with your state. This is important because any discrepancies can lead to delays or issues with your application.

💡  Mailing Address: Use a reliable address where you can receive important mail from the IRS. This should be an address that’s regularly monitored to ensure you don’t miss any critical correspondence.

💡  Responsible Party’s Name and SSN: This is typically the principal officer or the person in charge of managing the organization. Their Social Security Number (SSN) is required here. The IRS uses this information to track the responsible party in case of any tax issues.

💡  Type of Entity: Confirm that you’re a nonprofit organization. The IRS will ask for this classification during the application. This ensures that your organization is categorized correctly for tax purposes.

#2 Choosing the Application Method

There are several ways to apply for an EIN, each with its own set of considerations:

💡  Online Application: The fastest and easiest method. Available Monday to Friday, 7 a.m. to 10 p.m. Eastern Time. You get your EIN immediately. This method is highly recommended if you’re looking for quick results. It is user-friendly and has step-by-step instructions.

💡  Mail or Fax Application: This method is slower but sometimes necessary. Download and complete Form SS-4 from the IRS website, then mail or fax it to the appropriate IRS office. Expect a response in about 4-5 weeks by mail or around a week by fax.

This method can be useful if you prefer handling things on paper or if you encounter issues with the online application.

Special EIN Requirements for Nonprofits

Nonprofits have some unique requirements when applying for an EIN. Unlike for-profit businesses, nonprofits must meet specific criteria and follow additional steps to ensure their applications are accurate and complete. 

Here’s a rundown of what you need to know:

Keep Your Incorporation Documents Ready

Before applying for an EIN, make sure your nonprofit is properly incorporated according to your state’s laws. This typically involves filing articles of incorporation with your state’s government, which establishes your nonprofit as a legal entity. 

These documents are critical as they will be referenced during the EIN application process. 

Here’s what you should have ready:

👉 Articles of Incorporation

 This document outlines the fundamental details about your nonprofit, including its name, purpose, and structure. It’s essential for proving your organization’s legal status.

👉 Bylaws

These are the rules and procedures for operating your nonprofit, such as how decisions are made and the responsibilities of board members. 

While not always required for the EIN application, having your bylaws in order can be beneficial for future processes like applying for tax-exempt status.

Don’t Lose Your Tax-Exempt Status Application

If you plan to apply for tax-exempt status under section 501(c)(3), you’ll need your EIN first. The EIN is required when filing Form 1023 (the application for tax-exempt status). 

Achieving tax-exempt status is extremely important for many nonprofits as it allows donors to make tax-deductible contributions and often exempts the organization from federal income tax. 

Here’s what you need to consider:

👉 Form 1023

 This is the long form, used by larger organizations or those with more complex structures. It requires detailed information about your nonprofit’s structure, finances, and operations.

 You’ll need to provide a narrative description of your activities, a detailed financial plan, and supporting documents like your articles of incorporation and bylaws.

👉 Form 1023-EZ

 This is the streamlined version for smaller nonprofits with simpler structures. It’s shorter and easier to complete but has eligibility requirements. 

For example, your nonprofit’s annual gross receipts must be less than $50,000 and total assets must be under $250,000. The 1023-EZ form asks for basic information about your organization and a brief description of your activities.

👉 Supporting Documentation

You’ll need to provide detailed information about your organization’s structure, activities, and finances. This includes your articles of incorporation, bylaws, and a narrative description of your activities.

👉 User Fee

Applying for tax-exempt status involves a fee, which varies depending on the form you use and the size of your organization. Make sure to budget for this expense.

When to Seek Expert Help Like doola?

Here are a few situations when you have to ditch the DIY mantra and seek help from experts like doola. 

✔ Time Crunch

 If you’re on a tight schedule and can’t afford to wait, using an agency can expedite the process. This is especially helpful if you need your EIN urgently to open bank accounts or apply for grants.

✔ Limited Resources

 If your nonprofit has a small team and you need all hands on deck for other tasks, outsourcing the EIN application can save time. This way, you can focus on your mission rather than administrative tasks.

✔ Complex Situations

If your application is complicated or if you’re unsure about any part of the process, professional guidance can prevent mistakes and delays. Plus, complexities can arise if you have multiple responsible parties or if your nonprofit’s structure is unusual.

Why You Should Form Your Nonprofit with doola

We know that forming a nonprofit organization can feel like a steep uphill climb. 

But guess what? At doola, we’ve have the resources, experts, and dedication to make everything seamless and streamlined..  

Here’s how we help you set up your NGO (Non-Governmental Organization) with ease and efficiency.

🤝 Form Your Nonprofit from Anywhere in the World

You don’t have to be in the U.S. to create a nonprofit. Our services allow international founders to form NGOs in the U.S. without needing a Social Security Number. 

We specialize in helping non-US residents form nonprofits in states like Wyoming and Delaware, making it accessible no matter where you are.

Timeline: The entire process can take up to four weeks for non-US residents.

📝 Obtain EIN and Create Essential Documents

We assist you in obtaining an Employer Identification Number (EIN) and creating essential documents like bylaws and articles of incorporation for your NGO.

👩🏻‍💻 Free Registered Agent Service for One Year

Every nonprofit needs a registered agent — a designated person or service to receive legal documents on behalf of your organization. While you can serve as your own registered agent, the responsibilities can distract you from your core vision.

We offer a free registered agent service for the first year. This means you can focus on your nonprofit’s activities without worrying about legal notifications. 

After the first year, you can choose to continue with our service or appoint your own agent.

✍🏻A US Mailing Address/Virtual Mailbox

Your nonprofit must have a legitimate mailing address in the same state where it is formed. Not everyone has the means to establish a physical address in the US, but we’ve got you covered. 

Don’t worry. We provide you with a US-based mailing address or virtual mailbox that meets the requirements for forming your nonprofit.

Our 4 Simple Steps to Form Your NGO in the US

Here’s the lowdown on how our process works. It’s straightforward and designed to make your life easier.

Step 1: Submit Important Information

We get to work immediately after you submit your payment and information. All you need to provide are some basic details:

• Your ideal organization name
• Personal address (can be anywhere in the world)
• Email (for communication)
• Timeline: 1 week on average
• Dependencies: Processing speeds depend on the state

Step 2: Get Your U.S. Employer Identification Number (EIN)

Once your nonprofit is formed, we submit an EIN application on your behalf. No Social Security Number? No problem. We handle that process as well for you. 

If you do have a Social Security Number, providing it to us can speed things up.

• Timeline (with SSN): 1 – 2 business days
• Timeline (without SSN): 4 – 6 weeks on average
• Dependencies: IRS processing speeds

Keep in mind an EIN is essential for your nonprofit’s tax purposes, paying employees, and applying for grants and funding.

Step 3: Apply for a US Bank Account

To open a business bank account in the United States, you need an EIN. Once you have your EIN, we will guide you through the process of setting one up.

• Timeline: 3 – 5 business days
• Dependencies: The bank setup process

A US bank account helps manage your nonprofit’s finances and simplifies tax filings by keeping personal and organizational finances separate.

Step 4: Connect Your Bank Account to Your Payment Processor

Connecting your bank account to a payment processor ensures that your donations and funds are quickly accessible. 

After setting up your NGO, you want to ensure that incoming funds are seamlessly deposited into your US business bank account.

• Timeline: 3 – 5 business days
• Dependencies: The payment processor process

Setting up a payment processor like Stripe or another service allows your donors to use their preferred payment methods, reducing friction and enhancing the donation process.

Simplify Your Nonprofit Setup with doola

At doola, we’re all about making things simple for you.

From obtaining your EIN and setting up a US bank account to registering your nonprofit, we handle all the tough stuff so you can focus more on the cause your NGO was created for. 

Schedule a free consultation with us and see how we can help your NGO.