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What is an EIN?
EIN stands for Employer Identification Number—it’s a unique nine-digit number that identifies your business entity to the IRS. When you file any kind of federal tax return, this is how you’ll identify your business. It’s also sometimes called a Federal Employer Identification Number (FEIN) or Federal Tax Identification Number (TIN).
You can think of an EIN as a Social Security number for your business. Be careful to never give out your EIN unless you need to—in the wrong hands, it can be used for identity theft.
Does your business need an EIN?
Since the IRS uses EINs to identify which business tax returns taxpayers must submit, most self-employed folks and small business owners will need an Employer ID Number at some point (even tax-exempt and non-profit organizations). But you’re legally required to get an EIN if you answer yes to any of the following questions:
- Does your business have any employees?
- Does your business operate as a C corporation, S corporation, limited liability company (LLC), or partnership?
- Do you file employment or excise tax returns?
- Do you withhold taxes on income, other than wages, paid to a non-resident?
According to the IRS, sole proprietorships don’t require an EIN—they can just use their Social Security number (SSN). If you’re a sole proprietor that wants to do any of the above (hire employees, incorporate, file excise tax returns, etc.), though, you’ll still need an EIN.
Even if you’re not legally required to have an EIN, we recommend getting one anyway. EINs are also required to open business bank accounts and credit cards, apply for business licenses, and secure some types of financing.
Further reading: Is Incorporating Right For You? A Starter’s Guide
Getting a state EIN number
If your state requires you to pay state income taxes, you may need to get a state EIN number. The details change from state to state, so you’ll need to check with your state tax authority on how to get a state EIN (if you need one).
How Bench can help
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Applying for an EIN
Applying for an EIN is fairly straightforward, but there are some nuances depending on where your business is based.
You’ll need to complete the EIN application in one sitting, so be prepared and give yourself plenty of time to reduce any stress associated with the process.
United States-based businesses
Before you apply, make sure you have a Social Security number or Individual Taxpayer Identification Number (ITIN) and know what type of business you’re applying on behalf of. Only the “responsible party,” meaning the business owner or principal officer, can apply.
Make sure you know your business name as it shows on your tax documents, not a DBA (or “Doing Business As”). While a DBA may show up on your invoices or checks, the IRS uses your business name to identify you.
Probably the simplest (and definitely the fastest) way to apply is online, using the IRS website. Or, you can fill out IRS Form SS-4 and fax or mail it to the IRS.
International businesses
If you don’t have a legal residence or a principal place of business in the U.S., but you do need to file taxes there, you’ll be considered an international applicant.
Getting an EIN for an international applicant involves a little more paperwork, so you’ll want to follow these instructions from the IRS.
When you get your EIN
Be sure to note your EIN down somewhere handy and memorable so you can find it when you need it. If you do misplace it, try these IRS-approved tactics to recover it. It is possible to get a replacement number as a worst-case scenario.
How to do an EIN lookup
There may come a time when you need to search for another business’s EIN, either for your own tax purposes or to validate someone else’s information.
Here’s how:
- If you’re an employee and need your employer’s EIN, it’s on the back of your W-2 form
- If the company is publicly traded, use the Security and Exchange Commission’s EDGAR tool to look it up for free
- If the company is privately held, you may need to track down its accountant to ask or use a lookup service (first-timers can start with a free trial)
When you will need a new EIN
Generally speaking, you will only need to apply for a new EIN if you undergo a change in ownership or structure. Changing your business name or location will not require a new EIN.
Below is a breakdown of when you need a new EIN by entity type.
Sole proprietorships
If you are a sole proprietor, you are legally required to apply for a new EIN if:
- You are subject to a bankruptcy proceeding
- You incorporated
- You take in partners and operate as a partnership
- You purchase or inherit an existing business that you operate as a sole proprietorship
Partnerships
If you are a member of a partnership, you are legally required to apply for a new EIN if:
- You incorporate
- Your partnership is taken over by one of the partners and is operated as a sole proprietorship
- You end an old partnership and begin a new one
Corporations
If you are a member of either an S or C corporation, you are legally required to apply for a new EIN if:
- A corporation receives a new charter from the secretary of state
- You are a subsidiary of a corporation using the parent’s EIN, or you become a subsidiary of a corporation
- You change to a partnership or a sole proprietorship
- A new corporation is created after a statutory merger
Limited liability companies (LLCs)
LLCs are unique because they are created at the state, not federal, level. The IRS doesn’t see your business as an LLC. Instead, your business is classified by the IRS based on what it chooses to file as.
When you opt to become an LLC, you choose to be taxed the same way as before. This means that a sole proprietorship that becomes a single-member LLC will continue to be taxed as a sole proprietorship, while a partnership that becomes a multi-member LLC will continue to be taxed as a partnership. Similarly, any corporations that opt to become an LLC will continue to file taxes as corporations. You can change what you want your LLC to file as by submitting IRS Form 8832 (or IRS Form 2553 to become an S corporation).
As an LLC, when you need to change your EIN will depend on what you file as. Refer to the list above based on your filing type to know when it’s necessary.
You will be required to obtain a new EIN if the following statement is true:
- As a corporation, you filed papers with the state to convert to an LLC and will use the default classification of partnership (The corporation is treated as if it has liquidated in this case).
You will not be required to obtain a new EIN if the following statements are true:
- As a corporation, you filed papers with the state to convert to an LLC and will elect via Form 8832 to be taxed as a corporation.
- The number of members in the LLC changed from more than one member to a single member.
- The number of members in the LLC changed from a single member to more than one member.
- A sole proprietor filed papers to become a state recognized entity, organizes as an LLC, and will file Form 8832 or Form 2553 to elect to be treated as a disregarded entity or taxed as a corporation or small business corporation.
The difference between EIN and tax ID
There are a few different numbers used to identify a business, depending on the context.
As far as bookkeeping and taxes go, these numbers are often referred to generically as a tax ID, federal tax ID number, or business tax ID number. If you’re a business owner and you hear any of these terms, they are referring to your EIN.
