A Guide To Foreign EIN For US Companies

Foreign investment in the US has always been a successful way to generate local employment, increase GDP, and expand the capabilities of communities. One study on foreign multinational firms in the US found that, “An expansion in the foreign-multinational share of commuting-zone employment substantially increases the employment, value added, and—for higher-earning workers—wages at local domestic-owned firms.” This illustrates the ability for foreign investment, and foreign companies in the US, to generate fruitful benefits for both US communities and the companies themselves.  

Most companies in the US are required to possess an EIN. This number allows the state to not only recognize the business, but note them for tax purposes. Foreign companies in the US are not exempt from this, and are often under even more scrutiny to oblige to such regulations. Having an EIN allows foreign companies to operate without the necessity for a SSC, or Social Security Number. It is therefore very important for foreign companies or individuals who are looking to expand and open shop in the US to understand not only what an EIN is, but how to obtain it, and what is required to apply for one.  

What is an EIN or Employer ID?

According to an attorney, “Every foreign owned company needs an EIN. Banks require it and the IRS requires for filing form 5472. This rule applies for all Limited Liability Companies and Corporations.” This outlines that possessing an EIN for foreign owned companies is absolutely mandatory. But, what is an EIN?

EINs, or Employer Identification Numbers, are a form of business identification that are used to recognize any business entity. EINs are represented as nine digit numbers, and are used by the IRS for taxation purposes. 

To understand who needs an EIN, the IRS has developed a five-question system. These questions include: Do you have employees? Do you operate your business as a corporation or a partnership? Do you file any of these tax returns: Employment, Excise, or Alcohol, Tobacco? Do you have a Keogh plan?

For non-US residents, the IRS necessitates the possession of an EIN. This is especially true for companies that seek to have employees, open a business specific bank account, and form a corporation/partnership. It is also vital to have an EIN in order to protect members from liability, increase their privacy, and separate personal and business finances. 

Foreign companies need an EIN in order to file any and all business tax returns. Additionally, they need an EIN in order to pay employees, obtain business credit, and maintain their status as an official business entity. 

What is Needed for an EIN?

In order to obtain an EIN, foreign companies need to prepare adequate documentation. This means that the SS4 document needs to be filled in accurately and submitted. 

Additionally, companies will need to provide the name of the company, the owner information or registered agent information, and an address for mailing. This is also to be accompanied by the business entity type (LLC, Corporation etc.), the time and date of formation, anticipated number of employees, and the company’s industry. Moreover, companies will need to provide an expanded reason for their application. This reason should justify why the company requires an EIN. 

Businesses should be aware that delays in the process can occur due to incorrect or missing information, or their application may be rejected. Similarly, like most institutions, the IRS operates within a specific timeline, and is subject to holidays and maintenance periods. 

How to Obtain a Free EIN  

Foreign non-residents need to apply to obtain an EIN by using fax to submit an SS4 application. However, they can also mail the SS4 application. This option, though, can take more time and lengthen the processing time. 

Once the SS4 application has been submitted, the IRS will mail a CP 575 G to the address that was designated as the correct business address for the company. This process, however, can take some time, and the average waiting period can range between days and weeks. This is largely dependent on the season in which the application has been submitted. 

It is vital that any company that is submitting an application set aside time and resources to not only accrue the necessary documentation, but have the space to ensure that every bit of information is correct. By submitting incorrect or lacking information, a company can set back their application process by weeks, or even be outright rejected. This can be a frustrating process. It is therefore always advised that companies seek the aid of formation services and lawyers. By doing so, companies can ensure that their time is managed effectively, and that the entire procedure is done correctly and, importantly, swiftly.

There are many reasons why foreign and non-US residents would want to expand and establish business in the US. However, there is an array of formalities, documentation, and requirements, for these companies to adhere to and obtain. One vital example is an EIN. Most foreign entrepreneurs do not possess a SSC, so their EIN becomes their mandatory form of business identification. Without an EIN, foreign companies would not be able to perform and acquire many of the things that they would need to run their business. Whilst its primary purpose is to serve as a vehicle for tax identification and reports, EINs give businesses access to a variety of other benefits. These include: business bank accounts, the ability to hire and pay employees, and continue to maintain their legal business entity status.