Whether your business is organized as a sole proprietorship,
partnership, limited liability company, or corporation, your
annual income tax form requires you to provide your business
name (if it's different from your own name), your principal
business or profession, your principal business code, and your
employer identification number (EIN) if you are required to have
Employer identification numbers. Sole proprietors need
to have an EIN only if they have one or more employees, if they
have a Keogh plan, or if they are required to file excise tax
forms such as those for alcohol, tobacco or firearms. If you
purchase a business for which an EIN is needed, use your own EIN
or get a new one - don't use the EIN of the previous owner. If
you operate more than one business as a sole proprietor, you
should use the same EIN for all your businesses.
All partnerships and corporations must have their own EIN. If
you operate one or more businesses in forms other than sole
proprietorship, you'll need a separate EIN for each business
To apply for an EIN, you can file a paper Form SS-4, Application
for Employer Identification Number, with the appropriate IRS
Service Center for your state.
If you apply by mail, it generally takes about four weeks to
receive the number. If you are a new business and you need to
file your tax return before you receive the EIN, write
"applied for" in the space where the EIN should go.
You can also get an EIN immediately over the phone by calling
a special Tele-TIN number for your region as shown in the
instructions to the form; however, you'll still need to fill out
a paper SS-4 form and mail or fax it to the Service Center
within 24 hours. The IRS representative will give you the
correct fax number. The advantage of using this system is that
you will receive the EIN immediately and you can use it on your
tax forms right away.
Among the Business Tools is Form
SS-4. It is in Adobe Acrobat .pdf format,
and you will need Acrobat Reader 4.0 to view the
file and print it. A free version of Acrobat 4.0
is available in the Business Tools area as well.
Business codes. Whatever the form of business you
operate, you'll need to enter a six-digit business code at the
top of your annual income tax form.
Since 1998, business codes based on the North American
Industry Classification System (NAICS), rather than the old
Standard Industrial Classification (SIC) code system, are being
used. The complete list of business codes can be found in the
IRS instructions to the tax form that you file for your
business: Schedule C or C-EZ for sole proprietors, Form 1065 for
partners, Form 1120 for C corporations, or Form 1120-S for S
It's very important that you use the correct business code.
If your return is examined by the IRS, the agents may use this
code as a screening device to determine whether your income and
expenses are unusual for that type of business. If so, they may
decide to dig further into your return (and ask you to produce a
lot more records to prove your figures).
In the last several years, the IRS has been making an effort
to educate its agents about typical operating procedures in
different industries and even in specific types of businesses,
so that the agents can more effectively ferret out underreported
income and overstated deductions. If you report the wrong
business code, the IRS may be judging you by the incorrect
If you operate a retail jewelry business, the
IRS has a general idea of the percentage of your
revenues that should be eaten up by your cost of
goods sold. If you erroneously list your code as
"453220" which applies to gift shops,
your cost of goods sold may appear to be way out
of line and your tax return may be flagged for
If you find that your business does not fit neatly into one
of the business code categories listed by the IRS, consider
whether you might actually be operating more
than one business.
If you're convinced that you're operating only one business,
use the code that applies to the majority of your income and
expenses. The IRS does provide a code 999999 for business owners
that are unable to classify their operations, but we suggest
that you use this only as a last resort.