What Is an EIN?
An Employer Identification Number (EIN) is a unique 9-digit number issued by the IRS. It is used to identify a business for tax purposes, similar to how a Social Security Number identifies an individual.
Does My Business Need an EIN?
The answer depends on your business structure and operations. Here’s when you do need an EIN:
You Need an EIN If:
- You have employees.
- Your business is a partnership, corporation, or multi-member LLC.
- You file employment, excise, or alcohol/firearms/tobacco tax returns.
- You withhold taxes on income (other than wages) paid to a non-resident alien.
- You operate a trust, estate, nonprofit, or farmers’ cooperative.
- You offer retirement plans for employees.
- You’re involved in certain banking or financial transactions.
You May Not Need an EIN If:
- You’re a sole proprietor with no employees.
- You don’t file excise or pension plan tax returns.
- You use your Social Security Number for tax purposes.
However, even if not required, many business owners choose to get an EIN to:
- Open a business bank account
- Build business credit
- Maintain privacy by not using their SSN
- Appear more professional to clients and vendors
EIN for LLCs
- Single-member LLCs may not need an EIN unless they have employees or elect corporate taxation.
- Multi-member LLCs are required to have an EIN.
How to Get an EIN
Applying for an EIN is simple and free. You can apply:
- Online through the IRS website
- By fax or mail using Form SS-4
Final Thoughts
So, does your business need an EIN? If you plan to hire, open a bank account, or form anything beyond a sole proprietorship, the answer is likely yes. It’s free, easy, and protects your personal information.
