Frequently Asked Questions

Why is it smart to have an EIN when forming a nonprofit organization?

Having an Employer Identification Number (EIN) is a smart move when forming a nonprofit organization for several reasons. An EIN, also known as a Federal Tax Identification Number or Federal Employer Identification Number, is issued by the IRS and is used for all legal activities of the organization. This includes hiring employees, opening bank accounts, filing tax forms, and applying for business licenses. The EIN is similar to a Social Security number, but it is used for businesses rather than individuals. When forming a nonprofit, having an EIN means you don't have to use your personal Social Security number, providing a layer of security and privacy. Some states even require that you file for an EIN before applying for tax-exempt status from the IRS. Moreover, having an EIN is a prerequisite for incorporating a non-profit organization. Incorporation provides several benefits to non-profits, including the ability to apply for grant money, property tax exemptions, and the ability to receive tax-deductible donations. Without an EIN, a non-profit organization would not be able to incorporate and would miss out on these benefits.