Does an automotive shop need an EIN? A federal EIN Number is actually required for nearly every business, but it can be confusing because it isn’t given out with a business. If you’re running an automotive shop, you need to get an IRS FEIN number as early as possible.
Steps to Getting a Tax ID (EIN) Number for an Automotive Shop
- What Information Do You Need to Get an EIN?
- Does an Automotive Shop Need an EIN Number?
- What Does an Automotive Shop Need a Tax ID (EIN) Number for?
- How Do You Get an EIN Number for an Automotive Business Online?
- Does an Automotive Shop Need an EIN Number to Hire Contractors?
- How Long Does It Take to Get an EIN for an Automotive Shop?
To get an EIN Number, you first need to have basic information about your company. That includes your company structure, its address, and the information of a principal or registered agent. An agent will need to provide their full name, address and their Social Security Number (SSN) or ITIN. The agent is going to be the point of contact in the event that something additional is needed for the application or there are documents sent to the organization.
An automotive shop will absolutely need an EIN Number. While an Employer Identification Number is used for hiring employees, the same number is also used for paying federal taxes.
The only businesses that do not need an EIN number are sole proprietorship companies who do not do any hiring. An automotive shop is highly unlikely to qualify for this unless it consists of an individual mechanic working from their own home.
An automotive shop is going to need an EIN to get licenses and paperwork, hire employees, lease a business space, rent equipment, open a business bank account and more.
Before an auto shop opens, it should acquire an EIN Number. This will allow the shop to open business bank accounts and business lines of credit, both of which will likely be critical to getting equipment and space.
A tax ID (EIN) number is foremost used to hire employees and pay federal taxes. A separate number is used for state tax payments.
However, because an FEIN is a unique number that identifies your company, it’s also frequently used for other types of business paperwork. For an automotive shop, an EIN will be used for:
- Equipment leases. Many auto shops need to lease expensive equipment, rather than purchasing it. This is a loan or credit line.
- Wholesale purchasing. Wholesale companies use FEINs to denote businesses and measure their credit, to avoid high-risk businesses.
- Certifications. Auto shop certification will often rely upon the Federal ID, to track your business within the organization.
- Rental leases. To get a rental lease, you usually need to either do it through your business or personally guarantee it, which can be risky.
- Business bank accounts. A FEIN is used like a credit number, like an SSN, under which a business credit score will be established.
- Business loans. For business loans, an FEIN will be used to determine whether you’re a good borrower or not.
- Permits and licenses. Many permits and licenses require your FEIN in order to make sure that your business hasn’t had any previous issues.
Now that you know you need an EIN, you need to be able to acquire it quickly. The most expedient method of getting an EIN Number is to get it through a tax ID service online. Once you have your business and agent information, you can submit an application for a FEIN through the internet.
Once submitted, your request for an FEIN will be processed in under an hour. Your FEIN will be delivered through email and you can begin using the unique number on forms and paperwork immediately thereafter.
There are three other methods of getting an FEIN: phone, mail and fax. These all have some downsides to them.
Auto shops may be confused about an EIN Number because they primarily hire contractors. Since it’s called an Employer Identification Number and many auto shops don’t consider themselves employers, it may seem strange. But an EIN is also a Federal Tax ID Number, which is required for tax IDs.
Technically, no one needs an EIN Number to hire a “contractor”: you can use your Social Security Number to hire a contractor. But in order to hire a contractor as a business, you should be using an FEIN Number.
Further, many auto shops still need to hire other employees, such as office managers and administrative personnel. These types of employees cannot be considered independent contractors and it’s very important to have the proper documentation filed.
It takes about an hour to get an EIN if you file it online. A tax ID service can make this process faster because they can go through the application for you, verify it, and make sure there aren’t any mistakes. If you need to get an EIN, it’s best to get it online and through a tax ID service for this reason: It doesn’t have to be a long, complicated process.
On the other hand, it can take up to six weeks to get an EIN if you apply through the mail instead of applying online. It may take a business day to get an EIN through the phone and it may take up to four business days to get the EIN through fax.
Ultimately, any auto shop is going to need a federal tax ID or an EIN. Consequently, they should apply for it as soon as possible, as it opens a lot of doorways regarding things like documents.