Employer identification number (EIN) refers to a unique tax ID number assigned to a business entity so that the Internal Revenue Service (IRS) can easily identify it.
The EIN is essential for foreign businesses planning to start in the U.S., open a business bank account, hire employees, comply with the Internal Revenue Service (IRS), apply for permits or licenses, and file taxes.
A foreign business can easily apply for an EIN. When a foreign Corporation’s owners are non-citizens of the U.S. with no Social Security number or Individual Tax Identification Number (ITIN), they should apply for an EIN by completing Form SS-4. This form should be submitted by mail or fax.
Example: A German software company wants to expand to the US market. They decide to open a small sales office in New York and hire two U.S. employees. To do so, they may first obtain an EIN from the IRS. This EIN enables them to open a U.S. business bank account, pay their U.S. employees, file U.S. tax returns, and conduct business transactions. Without the EIN, they may not be able to operate their US office, pay wages, or handle most business banking in America.