What Is an EIN and Does Your Business Need One?

What Is an EIN and Does Your Business Need One?

by Jane Haskins, Esq., February 2015

An EIN, or Employer Identification Number, is a nine-digit number that the Internal Revenue Service uses to identify businesses that must file various types of business tax returns. It’s the business version of a Social Security number.

An EIN is sometimes referred to as a Taxpayer Identification Number (TIN), a Federal Tax Identification Number, a Federal Tax ID or an FEIN. Most, but not all, businesses are required to get an EIN before opening a bank account or filing tax forms.

What Kinds of Businesses Need a Federal Employer Identification Number?

Your business must obtain an FEIN if any of the following is true:

  • It has employees
  • It is a partnership, a corporation, or an LLC that is taxed as a partnership or a corporation
  • It files employment, excise or alcohol tobacco and firearms tax returns
  • It has a Keogh plan
  • It withholds taxes on nonwage income paid to a non-resident alien
  • It is involved with certain types of trusts, estates, real estate mortgage investment conduits, nonprofits, farmers’ cooperatives or plan administrators

Even if the IRS doesn’t require an EIN for your business, you may need one to open a bank account, obtain a business credit card, obtain business licenses or building permits, pay state or local taxes, or issue 1099 forms to independent contractors.

Which businesses don’t need a Federal Tax ID Number? Single-member LLCs and sole proprietors that don’t meet any of the above criteria are not required to obtain an EIN—they can use the owner’s Social Security number instead.  But many solo business owners choose to get an EIN for security reasons. Using your Social Security number for business matters can increase your risk of identity theft, particularly if you need to provide it to outside contractors, while using an EIN avoids exposing your personal information.

How Do You Obtain an EIN?

Applying for an EIN is free and only takes a few minutes. You will need the following information:

  • The legal name of the business or individual that is requesting an EIN, and the trade name, if there is one.
  • The mailing address, street address, and county and state where the business is located.
  • The name of the responsible party, and that person or entity’s Social Security number or EIN.
  • The type of business entity you are requesting an EIN for.
  • f your business is an LLC, the number of members.
  • If your business is a corporation, the state or country where it was incorporated.
  • The reason you are applying for an EIN.
  • The date you started or acquired the business.
  • The highest number of employees you expect to have in the next 12 months, and the first date on which wages were paid.
  • Information about your business’s main activities.

The fastest way to get an EIN is to apply online. Those who don’t want to apply online can apply by fax or mail by filling out IRS form SS-4. If you apply by fax, your EIN will be faxed to you within four business days. Mail applicants can expect to receive an EIN in about four weeks. If your business is located outside the United States, you must apply by phone or mail.

If you need or want an FEIN for your business, it’s best to apply right away, before you receive your official formation documents from the state. Then you’ll have it ready when you open a bank account, sign up for business licenses or make your first tax payments.

LegalZoom can obtain an EIN for you. Or, for a discounted rate, LegalZoom will obtain your EIN for you when you form a business (Express Gold package; otherwise, standard rates apply).