Getting an Employer Identification Number should be one of your first steps when opening a business. It’s free, simple, and you’ll have one less thing to do come tax time. Below we explain why you need one, and how to get it.
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. Don’t worry about keeping it secure though, because unlike a social security number, an EIN is not considered sensitive information.
Be careful to never give out your EIN unless you need to—in the wrong hands, it can be used for identity theft.
Do you need an EIN?
Most self-employed folks and small business owners will need an Employer ID Number at some point (even 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). The exception to this is if you’re a sole proprietor that wants to do any of the above (hire employees, incorporate, file excise tax returns, etc).
Even if you’re not legally required to have an EIN, we recommend getting one since EINs are also required to open business bank accounts and credit cards, apply for business licenses, and secure some types of financing.
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).
Applying for an EIN
Applying for an EIN is fairly straightforward, but there are some nuances depending on where your business is based.
To reduce any stress associated with the EIN application process, be prepared and give yourself plenty of time since you’ll need to complete the application in one sitting.
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 “responsibile party” can apply, which is the business owner).
If you don’t have 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 tactics to recover it. It is possible to get a replacement number—worst-case scenario.
How to Do an EIN Lookup
There may come a time when you need to search for another business’s EIN, for your own tax purposes or to validate some information.
- 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)
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 your EIN.