What Is an EIN, and Who Needs One?

An EIN comes up almost immediately after you form a business. The bank asks for it, your payment processor asks for it, and so does almost every tax form. It is free, it usually takes minutes to get online, and it stays with your business for life. Here is what it is, who needs one, and how to get it without paying anyone for the number itself.

What an EIN Is

An Employer Identification Number, or EIN, is a nine-digit number the IRS assigns to identify a business for federal tax purposes. It looks like this: 12-3456789. You may also see it called a Federal Employer Identification Number (FEIN) or a federal tax ID number. Think of it as a Social Security number for the business.

Despite the name, you do not need employees to get one. Many one-person businesses have an EIN.

Who Needs an EIN

The IRS says you need an EIN if, among other things, your business:

• Has employees.
• Operates as a corporation or a partnership. A multi-member LLC is taxed as a partnership by default, so it needs one.
• Has elected to be taxed as a corporation, including an S corporation.
• Files employment, excise, or alcohol, tobacco, and firearms tax returns.
• Withholds taxes on income, other than wages, paid to a nonresident alien.

Certain trusts, estates, nonprofits, and retirement plans need one too. The full list is on IRS.gov.

When You Might Want One Anyway

A single-member LLC with no employees that has not elected corporate tax treatment is not required to have an EIN for federal income tax. The owner can report business income on a personal return using a Social Security number. Many owners get one anyway, because:

• Most banks ask for an EIN to open a business account in the LLC's name. Why Your LLC Needs a Business Bank Account explains why that account matters.
• Clients who pay you may send a W-9 request, and an EIN lets you share a business number instead of your Social Security number.
• Payment processors, wholesale suppliers, and some licenses ask for one.
• If you hire later, you will need one then.

How to Get an EIN

Form your business first, so the IRS has the right legal name and structure. Then:

1. Apply online at IRS.gov. The online application is free and gives you the number as soon as it is complete. It is open on weekdays during set hours, and it times out if you leave it idle, so have your details ready.
2. Have your details ready: the business's legal name and address, the type of entity, the formation date, the reason you are applying, and the name and Social Security number or ITIN of the responsible party, usually the owner.
3. Save the confirmation notice. Download or print it when the application finishes. Banks often ask for this letter.

The online application requires a responsible party with a Social Security number or ITIN. If you do not have either, you can apply with Form SS-4 by fax or mail, and international applicants can also apply by phone. The non-U.S. founders guide walks through those options.

What an EIN Does Not Do

• It does not form your business. You form an LLC or corporation with your state. The how to start an LLC guide covers that step.
• It is not a business license. Cities, counties, and states issue licenses separately.
• It does not register you for state taxes. Sales tax permits and state payroll accounts are separate registrations.
• It does not build business credit by itself, though it is part of setting up the accounts that do.

An EIN Next to Your Other Numbers

A new business collects several numbers, and they are easy to mix up:

• EIN: from the IRS, for federal taxes.
• State filing or entity number: from your Secretary of State when you form the business.
• State tax ID: from your state's tax agency, if you collect sales tax or run payroll there.
• D-U-N-S Number: from Dun & Bradstreet, a private company, used by some suppliers and app stores. What Is a D-U-N-S Number? explains it.
• Unique Entity ID: from SAM.gov, for federal contracts and grants.

Keep all of them on one page in your business records, with the date each was issued.

Keep It Safe and Current

An EIN does not expire, and it stays with the business even if you are not using it. Store the confirmation letter with your formation documents. Share the number only with people who need it, like your bank, accountant, and clients who must report payments to you. If the business's address or responsible party changes, tell the IRS. If you lose the number, it is on your confirmation letter, old tax returns, and bank records, and the IRS can look it up for an authorized person.

The IRS does not charge for an EIN. Some websites look official and charge to apply. Services that help you apply charge for their help, not for the number. Our EIN service prepares and submits the application with you, and it is available on its own.

This post is general information, not legal or tax advice. Rules differ by state and change over time, so check your state's official website or a licensed professional before you act. YaH Brands is not a law firm or an accounting firm.

Form the business, then get the number. It is a few minutes of work that follows your business for life.