If you’re starting a business, hiring employees, or opening a bank account under a business name, you may be asking:
“Do I need a tax ID number?”
The answer depends on your business structure and activities. A Tax ID Number, often referred to as an Employer Identification Number (EIN) or Taxpayer Identification Number (TIN), is used by the IRS to identify entities for tax reporting purposes.
Let’s break down when you do and do not need one.
When You Need a Tax ID Number
You must obtain a Tax ID (EIN) if you:
1. Form a Corporation or Partnership
- All corporations, LLCs with multiple members, and partnerships need an EIN.
2. Hire Employees
- If you plan to hire even one employee, an EIN is mandatory for payroll reporting.
3. Open a Business Bank Account
- Most banks require an EIN to open a business account—even for single-member LLCs.
4. Apply for Business Licenses or Permits
- Some states and localities require an EIN to issue business licenses.
5. Operate a Nonprofit
- Nonprofits need an EIN to apply for 501(c)(3) tax-exempt status.
6. Administer a Trust or Estate
- Estates and certain trusts require an EIN for tax filings and banking purposes.
When You Might Not Need a Tax ID Number
You may not need a separate EIN if you are:
A Sole Proprietor with No Employees
- You can often use your Social Security Number (SSN) instead.
A Single-Member LLC (No Employees)
- The IRS may allow you to use your SSN unless your state or bank requires otherwise.
Caution: Even if not required by law, having an EIN can help you protect your SSN and make your business appear more professional.
How to Get a Tax ID Number
Getting a tax ID number is simple and free through the IRS:
- Apply Online: Use the IRS EIN Assistant
- By Fax or Mail: Submit Form SS-4 to the IRS.
- By Phone: Only for international applicants (non-U.S. residents).
Final Thoughts
So, do you need a tax ID number?
If you’re running a business, hiring staff, opening a bank account, or managing an estate or nonprofit—yes, you do. Even if you’re a sole proprietor, having an EIN can protect your identity and streamline your business operations.
