If your business has one or more employees, you will need to obtain an Employer Identification Number (EIN). However, even if your company does not have employees, other situations will require an EIN.
An EIN may be required by IRS, state or local government agencies, or financial institutions. Find out what an EIN is, when one is required, and how to get one.
What Is an EIN?
An EIN is a nine-digit number assigned by the IRS and is used by certain types of business entities to file tax documents with the federal government. It may also be needed for state government filings and financial accounts in the name of the company.
The term Employer Identification Number is really an inaccurate description, as an EIN is often required for a company that does not have any employees. For this reason, it is sometimes referred to as a Taxpayer Identification Number or a Tax ID Number and abbreviated as TIN.
When Is an EIN Needed?
The IRS requires any business that has one or more employees to have an EIN. If you expect to hire any employees within the next year, you should get an EIN.
Even if a company does not have any employees, the IRS requires an EIN for:
- Any business that is required to pay federal excise taxes.
- Any business that establishes a pension, profit-sharing, or retirement plan.
- Any partnership.
- Any corporation.
- A multiple-member LLC, regardless of how it chooses to be taxed.
- A single-member LLC that elects to be taxed as either a C corporation or an S corporation. (A single-member LLC taxed as a sole proprietorship is not required by the IRS to have an EIN. However, there may be good reasons to obtain one anyway, as discussed below.)
Even if the IRS does not require an EIN, you may find it necessary or desirable to obtain an EIN in one or more of the following situations:
- You are required to have an EIN by a state or local government agency.
- You wish to open a bank account, obtain a credit card, or take out a loan in the name of the company and are required to have an EIN by the financial institution.
- You desire to have an EIN for your business rather than using your personal Social Security number. This gives you some degree of privacy protection by separating your business from your personal finances. However, you may not obtain an EIN simply as a replacement for your Social Security number.
How to Get an Employer Identification Number
To apply for an EIN, you will need to file Form SS-4, Application for Employer Identification Number (EIN), with the IRS. Filing can be done online, by fax, or by mail. Online filing will get you an EIN immediately. Filing by fax takes about four days, and filing by mail takes about four weeks.
The second page of Form SS-4 has a table to help you determine if you need an EIN and which lines of the form you need to fill in for each situation. For complete information, including line-by-line instructions, refer to the IRS Instructions for Form SS-4 and IRS Publication 1635, Employer Identification Number: Understanding Your EIN.
Generally, the EIN application form requires you to fill in the following information:
- The full legal name of the entity. Be sure to read the instructions in Publication 1635 if the name has any non-alphanumeric characters other than a hyphen (-) or ampersand (&).
- Any trade name used by the business. This is also known as a "doing business as" or DBA name, a "fictitious name," or an "assumed name."
- The company's mailing address and street address if different from the mailing address.
- The name of a "responsible party." This is a person who controls, manages, or directs the business operations.
- The responsible party's Social Security number (SSN), Individual Taxpayer Identification Number (ITIN), or EIN. (The IRS issues an ITIN to a taxpayer who is not eligible for an SSN.)
- Whether the application is for an LLC. If so, the number of members must be listed, and you must indicate whether the LLC was organized in the United States.
- The type of entity. For a business, the choices are sole proprietor (you will fill in your Social Security number), partnership, corporation, or personal service corporation. If the company is an LLC, read the Instructions for Form SS-4 relating to line 9a, or apply online and select "Limited Liability Company" as the type of entity. There are other types of organizations listed on the form, but these are not for business entities.
- If the entity is a corporation, the state or foreign country of incorporation.
- The reason for applying for an EIN. Select one of the options on the form.
- The date the business was started or acquired.
- The closing month of the company's accounting year.
- The greatest number of employees the company expects to have in the next twelve months. If you don't expect to pay more than $5,000 in total wages to all employees, there is a space to elect to file an annual tax return rather than quarterly returns.
- The first date employee wages were paid if any.
- The principal activity of the business, selected from one of the choices on the form.
- The principal goods or services provided by the business.
- Whether the entity has previously applied for an EIN, and if so, the previous EIN.
- Appropriate signatures, dates, addresses, and phone and fax numbers for the applicant and any third party designated to receive information and inquiries relating to the application.
Whether an EIN is required by the IRS, another government agency, or for some other reason, getting one is simple and easy. Just complete and file a one-page form. Filing is free and may be done online.