An employer ID number, commonly known as an EIN, serves as an identifier for federal tax purposes. Think of it as a Social Security number for your business entity. Most businesses need an EIN, but some may not. Here's how to know when you need an EIN, when you don't need an EIN, and when you might need a new one.
- Your business made need an employer ID number (EIN) for a variety of tax-related purposes, but it depends on a few factors like your business structure and if you have empkoyees.
- You may want an EIN, too, such as if you plan to open a business checking account.
- Most sole proprietors can use their personal Social Security number for their business, but an EIN is required if you ever want to change your business structure.
- If you already have an EIN for your business, you may need a new one if certain things happen.
When Does a Business Need an EIN?
Your business must have an employer ID number (EIN) if:
- You have employees
- You are operating your business as a corporation or partnership
- You have a limited liability company (LLC) taxed as a corporation or S corporation
- You file an employment tax return, excise tax return, or alcohol, tobacco, and firearms return
- You withhold taxes on income paid to a non-resident alien
- You have a Keogh plan
Types of organizations that must have an EIN include:
- Trusts (except certain grantor-owned revocable trusts, IRAs, and Exempt Organization Business tax returns)
- Real estate mortgage investment conduits
- Non-profit organizations
- Farmers' cooperatives
- Plan administrators
When Might You Want an EIN?
Even if your business doesn't need an EIN for federal tax reasons, you may still want to get one since it's required in the following situations:
- Opening a business bank account
- Applying for business licenses
- Filing electronic tax returns and payments—most federal tax payments must be made electronically using the federal tax filing system (EFTPS), and an EIN serves as the identifier on all tax returns
- Filing state taxes—you may also need a state EIN in some states
Does a Sole Proprietor Need an EIN Number?
If you are forming a sole proprietorship and you have no employees, you may not need an EIN. You will be filing your business income taxes with your personal tax return (Form 1040 and Schedule C), so you can use your Social Security number as your business taxpayer ID.
Your sole proprietorship will need an EIN if:
- You are subject to a bankruptcy proceeding
- You change your business to a corporation
- You take on partners and form a partnership
- You change your business to a multiple-member LLC
- You change your LLC to be taxed as a corporation or S corporation
- You buy or inherit an existing business that you operate as a sole proprietorship
A single-member LLC is a special case when it comes to EINs. It's considered a disregarded entity. Your single-member LLC doesn't need an EIN (you can use your Social Security number) unless you pay employees or excise taxes.
Do I Need an EIN for a Qualified Joint Venture?
A qualified joint venture is a specific type of business co-owned and operated by two spouses. In general, spouses don't need EIN numbers because they're treated as sole proprietors for federal tax purposes. If you already have a spousal partnership with an EIN, retain the partnership EIN in case you lose your qualified joint venture status.
When To Apply (and Not Apply) For a New EIN
If you already have an EIN and your business changes, that doesn't mean you automatically need a new one. The IRS says you should not apply for a new EIN if:
- You change the name of your business
- Your partnership or corporation declares bankruptcy
- Your corporation elects to be taxed as an S corporation
- You elected on Form 8832 Entity Classification Election to change the way your business entity is taxed
- You change the location of your business or add locations—use Form 8822, Change of Address, instead
If you make typical changes to your business, like a change of business name or address, you don't need a new EIN. But there are some other times when you will need to get a new one.
If your business is a corporation, you will need a new EIN if your corporation receives a new charter from your state or if a new corporation is created after a merger. Also, a new EIN is necessary if you are a subsidiary of a corporation using the parent's EIN or you become a subsidiary of a corporation.
If your business is a partnership, you will need a new EIN if you end one partnership and create another new one or if your partnership is taken over by one of the partners and is operated as a sole proprietorship.
An LLC entity is always a special case when it comes to federal taxes. An LLC is taxed either as a sole proprietorship (if it's a single-member LLC) or a partnership (with multiple owners). The rules on needing a new EIN do apply to these business types.
How To Apply for an EIN
You can apply for an EIN number with the Internal Revenue Service (IRS). The easiest and quickest way is to do it online. You can also apply by phone, fax, or mail. It is free to apply on the IRS website, so be aware of websites requiring a charge—it's likely not a real EIN.
After filling in the application online with your information—name, Social Security number, etc.—the information will be validated and you should get the EIN right away.
To apply by fax or mail, you'll need to fill out Form SS-4. You can find the fax and mailing address on the IRS website.
Frequently Asked Questions (FAQs)
What is an employer ID number?
An employer ID number (EIN) is a taxpayer number that business owners may need if they operate a certain type of business. It's how the IRS can identify the business. It's separate from a Social Security number, and you may not need an EIN if you're a sole proprietor.
How do you find your employer ID number (EIN)?
If you used an employer ID number (EIN) to open a bank account for your business, you can contact the bank and it can give you your EIN. If you applied for a state license, you may also be able to get your EIN through that agency. If you have an old tax return, you can find your EIN there, too. If you still can't find it, you can contact the IRS by calling the Business and Specialty Tax Line at 800-829-4933.