An Employer Identification Number (EIN) is a unique nine-digit number issued by the IRS to identify a business entity for tax purposes. Whether you’re running a startup, forming an LLC, or managing an estate, you may wonder: what is an EIN number used for?
Let’s break down its primary uses.
1. Filing Business Taxes
The most common use of an EIN is for filing federal and state taxes. Businesses use it instead of a Social Security Number (SSN) when reporting income and paying taxes.
2. Opening a Business Bank Account
Most banks require an EIN to open a business checking or savings account. It separates your personal and business finances—important for liability and accounting.
3. Hiring Employees
If you plan to hire staff, the IRS mandates that you obtain an EIN to handle payroll taxes, employee withholding, and other employment-related filings.
4. Applying for Business Licenses and Permits
Some states and local agencies require an EIN to process business licenses, permits, and registrations—even for sole proprietorships.
5. Establishing Business Credit
Vendors and creditors often ask for your EIN when you apply for business credit or loans. It helps establish your company’s credit profile.
6. Forming Certain Business Structures
LLCs, corporations, and partnerships typically need an EIN to complete their formation paperwork and remain in good standing with the IRS.
7. Managing Trusts and Estates
EINs are used to administer trusts and estates when filing taxes for the deceased or managing assets on behalf of a beneficiary.
Final Thoughts
So, what is an EIN number used for? It’s your business’s tax ID and is crucial for banking, hiring, tax reporting, and licensing. Whether you’re launching a new venture or managing an estate, having an EIN ensures you meet legal and financial requirements.
