What is an EIN?
EIN is an abbreviation for Employer Identification Number and is often referred to as a FEIN or Federal Employer Identification Number. The EIN is a unique nine-digit number from the Internal Revenue Service that identifies business entities for federal tax purposes.
Do I need an EIN?
Not all businesses need an EIN! Only businesses that have employees operate as a partnership, corporation, or Limited Liability Company (LLC) taxed as a corporation will need to get one. So as a sole proprietorship or a single-member LLC that doesn’t have employees, you may not be required to get one. In this instance, the business is identified by the owner’s Social Security Number (SSN).
For those businesses that aren’t required to get an EIN, it may be worth considering to help protect the owner’s personal finances and help prevent identity theft. Having an EIN for the business means the owner won’t have to provide their Social Security number to vendors or clients.
What is an EIN used for?
- Open a bank account – Banks need an EIN (or SSN or ITIN of the owner if the EIN isn’t needed) before opening a business bank account.
- Obtaining business loans, lines of credit, and credit cards under the business’s name.
- Apply for business licenses & permits – Most business licenses and permits will require the EIN (or SSN of the owner) before granting one.
- File tax returns – To file taxes for both state and federal, the EIN is used to identify the business.
- Hire employees – The EIN is the account number for the business to withhold taxes on wages and salaries.
How much does an EIN cost?
There is no cost to get an EIN through the Internal Revenue Service (IRS).
How long does it take to get an EIN?
The preferred method to apply for an EIN is to visit the IRS website and apply for an EIN online. The online application is only available through the IRS between 7 am – 10 pm EST, Monday – Friday. It takes about 5 minutes to complete the EIN application, and the number is available immediately afterward.
If applying online isn’t an option, you can apply by sending the IRS Form SS-4 by mail or to the IRS’s fax number. An EIN can also be requested over the phone, but note that it isn’t a toll-free number. Typically, an EIN not filed online will take 3-4 weeks to be filed.
Here is an instructional video on how to apply for an EIN.
What information do I need to get a tax identification number?
Applying for an EIN is pretty straightforward, but you will need to obtain some information beforehand, such as:
- The legal name of the business entity
- Business address
- Name of the principal officer, manager, or owner
- Principal’s Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN)
- If an LLC, the number of members
- Type of business entity (sole proprietor, partnership, and corporation are most common for businesses)
- Reason for applying (starting a new business, hiring employees, banking purpose, purchasing a business, etc.)
- Date the company was started or acquired
- Closing month of the entity’s accounting year
- Number of employees that are expected to be hired
- The principal activity of the business
What’s the difference between a Tax ID Number and an EIN?
We get a lot of questions from people who get confused between the EIN and tax ID number/state sales tax registration. A business may need one or both depending on their business entity, their state requirements, and what is being sold. The EIN is a number that is used to identify a business. As we saw earlier, some businesses need one, while others don’t. The tax ID number is usually a state requirement for businesses with employees or those that sell products. Often, this tax number is provided by the state’s Department of Revenue (or similar state agency). Each state is different, so be sure to check out our guide to starting a business in your state and see Step 5.
The EIN also doesn’t allow you to buy products at wholesale either. The ability to do so is through the Department of Revenue by applying for a state sales tax permit and obtaining a resale certificate. In states that charge sales tax, the end-user of a product is the one who pays for the sales tax, not the people in between. The retailer charges sales tax to the customer and then typically at the end of the month, the retailer pays the collected sales tax to the state.
The EIN is also different than a business license. An EIN is a unique identifier provided by the IRS, while a business license is required by some states and/or cities to operate a business legally.
What is the difference between an EIN and a DUNS number?
Like an EIN, a DUNS (Data Universal Number System) number is a unique nine-digit number for businesses to monitor credit. The EIN is used for tax reporting purposes.
Do I need a new EIN for each business?
Each business should have its own EIN, but sole proprietors may only have one EIN, regardless of the number of businesses they own.
Does an LLC need an EIN?
Sometimes. Single Member LLCs are registered by default as a disregarded entity will use the owner’s Social Security Number unless the business hires employees. LLCs set up to be taxed as a partnership or corporation will need an EIN.
How long is an EIN good for?
An EIN never expires and never needs renewing. Once it has been assigned to a business entity, it becomes the permanent Federal taxpayer identification number for that entity.