International trade and business operations have become increasingly common in today’s globalized economy. Companies from different countries are expanding their operations beyond their domestic borders, requiring them to comply with the laws and regulations of various countries.

One essential requirement for businesses operating in the United States or dealing with US-based entities is obtaining an Employer Identification Number (EIN).

Therefore, understanding and navigating the requirements for obtaining an Employer Identification Number (EIN) is crucial. In this blog, we will break down everything you need to know about EINs for international businesses operating in the US.

From the application process to compliance regulations, we’ve got you covered.

Let’s dive in!

What Is an EIN?

An Employer Identification Number (EIN) is a unique nine-digit number the Internal Revenue Service (IRS) assigns to identify businesses for tax purposes. It is also known as a Federal Tax Identification Number and is similar to a Social Security number issued to individuals.

However, an EIN identifies a business entity instead of identifying an individual.

Obtaining an EIN is crucial for any business looking to operate in the US market or conduct business with US-based companies for various legal purposes.

The IRS will require all businesses that operate as partnerships, corporations, or non-profit organizations in the United States to obtain an EIN.

Why Do You Need One?

An EIN is a crucial requirement for any international business operating in the US or conducting business with US-based companies. It fulfills tax obligations and benefits your business’s credibility and protection.

Therefore, it is essential to understand the significance of an EIN and obtain one if your business falls under the requirements.

Any business required to file taxes in the US, regardless of size or location, needs an EIN.

This includes international businesses in the US, such as subsidiaries or branches, and those that conduct business with US-based companies or earn income from sales within the country.

The primary purpose of an EIN is to identify your business for tax-related matters. This number will be used on all tax documents and correspondence with the IRS. It is necessary when filing federal taxes, paying employee wages, and opening a bank account for your business.

Having an EIN can benefit your business in addition to tax purposes. First, it helps establish credibility and legitimacy with clients and vendors in the US market. Many companies require an EIN before they will do business with another company.

Moreover, having an EIN allows you to hire employees legally within the US.

If you plan to expand your operations into the US market and hire American citizens or residents as employees, you will need an EIN to comply with employment laws.

Generally, any company that hires employees with a US-based bank account or operating as a corporation or partnership must have an EIN.

Non-US founders who do not fall under these categories may also need an EIN if they plan on conducting any of the following activities in the US:

1. Filing taxes

If your business will generate income in the US through selling goods or services or earning interest from investments, you must file taxes with the IRS. This requires having an EIN.

2. Establishing credit

Many banks and financial institutions require businesses to have an EIN before opening a credit account or applying for loans.

3. Hiring independent contractors

If you plan on hiring independent contractors based in the US, you must obtain an EIN for tax withholding purposes.

Furthermore, obtaining an EIN can protect your personal information by keeping it separate from your business’s financial activities.

Without one, you may be required to provide personal information, such as social security numbers, on publicly available forms.

Eligibility for Obtaining an EIN as a Non-US Founder

Now that we have established why obtaining an EIN is necessary let’s delve into what are the requirements of obtaining an EIN.

Non-resident aliens are individuals who are not citizens of the United States and do not reside there permanently but conduct business activities within its borders.

If you are classified as a non-resident alien but own a US-based business entity such as an LLC or Corporation, you can apply for an EIN by completing Form SS-4.

There are also foreign-owned single-member LLCs owned by non-US citizens, foreign entities, or foreign corporations incorporated outside the US that conduct business activities within their borders.

They can apply for an EIN if they have a US-based office or bank account or plan on filing tax returns with the IRS.

Non-US founders who meet the above eligibility criteria can apply for an EIN to establish their business presence in the United States.

It is essential to carefully review your business activities and consult a legal professional before applying for an EIN to ensure compliance with all requirements.

Step-by-Step Guide to Applying for an EIN

Obtaining an EIN is relatively simple and free of charge. You can apply online through the IRS website or by mail using Form SS-4. The process usually takes only a few minutes, and you will receive your EIN immediately upon completion. 

Step 1: Determine Your Eligibility

Generally, any foreign business entity with US-based income or activities requires an EIN.

This includes companies that have employees or conduct trade in the US. However, it’s best to consult with a legal professional if you are unsure about your eligibility.

Step 2: Choose Your Method of Application

You can apply for an EIN in three ways – online, by mail or fax, and by phone. The most convenient and efficient method is through the IRS website, where you can receive your EIN immediately after completing the application. 

If you prefer to apply by mail or fax, you must complete Form SS-4 and send it directly to the IRS.

If you choose to apply by phone, be prepared with all necessary information, as the process will be completed during your call.

Step 3: Gather the Required Information

Regardless of which method you choose for application, certain pieces of information will be required from you, such as:

– Business name and address

– Type of entity (e.g., corporation, partnership)

– Legal structure (e.g., LLC)

– Purpose of business

– Principal activity/line of business

– Name and social security number/taxpayer identification number (TIN) of the responsible party (e.g., owner, partner, officer)

– Date business started

Step 4: Complete the Application

If you apply online, you will be guided through a series of questions. Once you complete them, your EIN will be instantly generated. If you choose to apply by mail or fax, double-check all the information provided in Form SS-4 before submitting it.

Step 5: Receive Your EIN and Keep It Secure

Once your application is approved, you will immediately get your EIN for your business via fax or mail. Keeping this number secure is essential, as it is unique to your company and should only be used for official purposes.

Keep this number handy, as it is required for US tax filings and other business-related transactions. 

Other Requirements and Documentation Needed for Non-US Founders

In addition to an EIN, non-US founders must obtain an Individual Taxpayer Identification Number (ITIN). This is necessary for tax purposes and can be obtained by filling out Form W-7 through the Internal Revenue Service (IRS).

Non-US founders must also provide proof of identity, such as a passport or national ID card when applying for an ITIN.

Another crucial requirement for non-US founders is a physical address in the US. Since you may not have a physical presence in the US, you must appoint a Registered Agent who can act on your behalf.

This person or entity will receive legal documents on behalf of your company, such as lawsuits or tax notices. 

Along with these requirements, there are several documents that non-US founders must prepare when setting up a US business. These include:

1. Company Formation Documents

Depending on the type of legal entity chosen (LLC, corporation, partnership), different forms and documents may be required, such as articles of incorporation or an operating agreement.

2. Proof of Funds

Non-US founders may be asked to provide evidence of sufficient funds to support their new venture in the US.

3. Bank Statements

Bank statements from the non-US founder’s home country can help establish financial stability and credibility.

4. Legal Contracts

If the business enters into contracts or agreements with other parties, a legal professional should prepare and review these.

It is also essential for non-US founders to research and understand any specific industry regulations or licenses required for their particular business. This may vary depending on the state in which the company will operate.

If you have any questions or concerns about the process, it is recommended that you consult a Certified Public Accountant (CPA) to ensure a smooth process.

Benefits of Having an EIN as an International Business Owner

As an international business owner, obtaining an Employer Identification Number (EIN) may not be at the top of your to-do list.

However, having an EIN can bring many benefits and is crucial in navigating US requirements for conducting business in the country.

1. Opening Business Bank Accounts

A US business bank account is necessary for conducting business operations and receiving payments from US customers. However, opening a bank account as a foreign entity can be challenging due to stricter Know Your Customer (KYC) rules.

An EIN can make the process smoother, as most banks require it.

2. Establishing Business Credit

One significant benefit of having an EIN as an international business owner is that it helps establish business credit in the US.

With this unique number, you can open a bank account or apply for credit cards and loans solely under your business name. 

This will help build a strong credit history for your company and allow you to access financing options that may only be available to some.

3. Complying with US Tax Laws

An EIN also ensures that your international business complies with US tax laws. As per IRS regulations, any non-US entity doing business within the country must have a valid EIN to file taxes and pay applicable taxes on income earned from US sources. 

4. Simplifying Business Transactions

An EIN simplifies various aspects of running a business in the US. You can use it instead of your social security number on legal documents like contracts or invoices, thus maintaining privacy and security.

5. Hiring Employees

If you plan on hiring employees within the US or expanding your operations to include local staff, having an EIN is mandatory. It allows you to accurately track employee wages and manage payroll while complying with employment laws.

6. Applying for Licenses and Permits

Certain licenses or permits may require a valid EIN as proof of legitimacy for international business operations in the US market. This includes federal licenses like those obtained from the Food and Drug Administration (FDA) or the Federal Communications Commission (FCC).

Some states may also require additional permits or licenses depending on the nature of your business activities.

Realize Your US Dream with doola’s LLC and EIN Services

Before applying for an EIN, you must incorporate your business into a separate legal entity, such as a Limited liability company (LLC). LLCs are the most common structures for foreign-owned businesses in the US.

They also provide liability protection, tax benefits, and credibility to potential clients or investors in the US market. 

However, registering your company as an LLC can be a tedious process, especially for international businesses.

However, with doola, you can smooth out any bumps in setting up an LLC as a non-US founder.

With doola’s LLC Formation services, we handle all aspects of the formation process for you.

We will ensure that all necessary paperwork is completed and filed accurately and efficiently, saving you valuable time and resources.

We will also apply for EIN after registering your business as an LLC.

This process involves filling out lengthy forms and filing them with the IRS. We will simplify this process by completing all required forms on your behalf and providing you with your EIN within 24 hours.

Our team has extensive experience working with international businesses looking to establish themselves in the US market.

We tailor our services to meet each client’s specific needs and provide personalized support throughout their entire journey.

In addition to LLC formation and EIN services, doola offers a range of other solutions, such as Registered Agent services, Bookkeeping, and more, to support your business’s day-to-day operations in the US. 

This comprehensive approach allows us to be a business-in-a-box solution for all your business needs, making expanding into the US seamless and hassle-free.

Let doola be your trusted partner in making your US business journey successful.