If two or more people come together for a business or trade and form a partnership, they would need a Tax ID (EIN) for tax purposes and other operations of the business in the US.
An Employer Identification Number is required for partnerships in the US, even if you don’t have any employees. So, if you are the responsible party of the partnership, you must learn the EIN application process to ensure your partnership meets all the legal obligations.
Apply for a Tax ID (EIN) Number for a Partnership
The IRS issues the Tax ID (EIN) number and ITIN number for businesses and individuals for tax purposes. Employer Identification Number is the nine-digit unique number that identifies the tax accounts of the employers or others who do not have employees.
People who have come together to form a partnership and build a business together need to get an EIN for their business entity tax liabilities and smoother operations. The Internal Revenue Service accepts applications for EINs by mail, fax (855-641-6935), and online tool (EIN Assistant).
The online application is the fastest one to get the EIN in a day, whereas others can take days or weeks. However, before you move to complete the EIN application for the partnership, you must form and control the assets and finances, and you must understand when you will need the EIN for your partnership.
Why will the Partnership need the EIN?
If you are in partnership, you will need the EIN for the following purposes apart from the tax purposes:
- Opening a partnership bank account
- Recruit employees for your business
- You need to withhold taxes on wages,
- Pay the duties, excise, tobacco, alcohol, or firearms taxes
- State tax obligations
- Applying for a business license
Now, what if you already have an EIN, but under the following conditions, you may need to obtain a new EIN:
- When one partner has taken over the partnership, and now the business is operating as a sole proprietorship;
- The partnership business is converted into a single entity, and its legal structure is also changed.
- The partnership between both parties is terminated, and they are no longer part of any business operations, and a new partnership has taken over.
What needs to be done before applying for your partnership’s EIN?
The following details should be verified and ready if you are applying for the partnerships’ EIN:
- Your legal partnership should be registered with the state, which would validate that your business structure complies with the state statute.
- You will require your SSN or ITIN if you are termed as the responsible party.
- If you are a third party applying for your client, you would sign an authorization form from the partner responsible for the assets and finances of the partnership.
- You may need your partnership details and business details.
How to file the EIN application for a partnership in a minute?
IRS understands the need for an EIN for business operations; hence, they have initiated an online tool that can complete the application in a few minutes, apart from the traditional methods. You can find the online EIN application steps below:
- Visit the EIN Assistant web page and click on the EIN Application continue tab.
- Next, select your legal entity as “Partnership.”
- Next, enter your partnership name, involved parties, and other information.
- You must input the details for the third party or the responsible party, as appropriate.
- To finish the EIN application, check your entries and select the Submit tab.
After you submit your EIN application, the IRS system will validate your information, and if it is correct, your EIN will be issued online in a few minutes. The confirmation letter will be sent to you, and you can also ask to have the EIN sent to you via mail.
If you can’t apply online, or the tool is not working at the time, you can download and print the EIN IRS form SS-4 and fax it or mail it to EIN Operations, Cincinnati, OH 45999.
What are the conditions when you do not need to acquire a new EIN for partnerships?
The business entity or partnership must have one EIN for smooth tax administration; hence, you should know when your old EIN is valid and you do not need a new one:
- When a partnership has set up a bankruptcy liquidation trust;
- When you change your business name and address of the business;
- When the partnership ends under IRC 708b (B) section, that is, half or more of the ownership of the business is sold or transferred within a year, and now it is treated as a new partnership with the same assets, you can operate the business with the old EIN.
To cut down on paperwork and save time, it’s essential to know when you need an EIN or a new one. A partnership between any two parties, whether they are spouses, will be treated as a partnership, so apply for EIN if you haven’t already applied and get your business’s financial identity.
