Does My Business Need an Employer Identification Number (EIN)?

An EIN is a unique tax identification number for your business that is used for tax filings, bank accounts, and other government filings.

By , Attorney

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Employer Identification Numbers (EINs) are unique nine-digit numbers assigned by the IRS to a business. The business uses it on tax returns, bank accounts, and other government filings. Many businesses must have an EIN, while it is optional for some single-owner companies. When you do not have an EIN for your company, you instead use your social security number on your business accounts and government filings.

Who Needs an EIN?

The following businesses must have an EIN:

  • corporations
  • partnerships
  • multi-owner LLCs
  • nonprofit organizations
  • all businesses with employees
  • businesses that file employment, excise, alcohol, tobacco, or firearm tax returns, and
  • companies with Keogh plans.

Single-owner companies, including sole proprietorships and single-member LLCs (SMLLCs), do not need an EIN unless they have employees, file one of the above-mentioned tax returns, or maintain Keogh plans (a Keogh plan is a type of retirement plan for self-employed individuals). However, some banks require businesses to have an EIN to before they can open a bank account.

Benefits of an EIN

Even when not required, you may apply for an EIN for any business. If you plan to have an EIN in the future (perhaps you're considering hiring an employee, but not quite yet), it's a good idea to submit your application now to avoid the hassle of changing account numbers later. An EIN allows you to keep your personal information safe—without an EIN, you will use your social security number on your business filings and accounts.

An EIN might benefit your business financially. When reviewing loan applications, some lenders prefer to see an EIN rather than a Social Security number. Having an EIN also allows you to build the business's credit score, which is separate from your personal credit score. A strong business credit score can lead to better interest rates and loan opportunities.

For SMLLCs, an EIN can help maintain the personal liability protection for the owner that the SMLLC normally provides. The added protection is helpful when a court is considering whether the LLC owner treated the business like a sole proprietorship, rather than as a separate business entity. If a judge decides the former, the judge might hold the owner personally responsible for the debts and obligations of the business. While an EIN is no guarantee that liability protection will always result in intact liability protection, having the number is a simple step to take to decrease the likelihood of losing protection.

How to Obtain an EIN

The EIN application, Form SS-4, is free and simple to fill out. You can complete a paper application and fax or mail it in, or submit the application online to the IRS. If you use the online application, you'll receive your EIN immediately after submission.

You need basic information about your business to complete the application, including the:

  • name of the business
  • address
  • type of entity
  • reason for applying (new business, hiring employees, change of entity, or other reason)
  • fiscal year (the 12-month accounting period, which may end in December or a different month)
  • date business started
  • estimated number of employees, and
  • principal activity for your business.

Save and print the EIN confirmation for your records. You will use the number on all of your government filings, so keep it readily accessible.

When to Apply for a New EIN

You will likely use the same EIN for throughout the existence of your company. However, if the business changes so substantially it essentially becomes a new business, the IRS will require you to apply for a new EIN. This occurs when the business changes its structure or ownership. Any time a business transfers to someone who will run it as a sole proprietor (regardless of the prior business entity), the new owner must obtain a new EIN. If a business changes its structure, whether it is from a sole proprietorship to an LLC, or a corporation to a partnership, the business needs a new EIN. If a business goes into bankruptcy, it will need a new EIN if the business was a sole proprietorship, but not if the business is a corporation or a partnership.

If you change the name, location, or tax status of your business, you do not need an EIN. Changing your tax status includes electing S Corporation status, and applying for 501(c)(3) tax-exempt status.

The rules for corporations are more complex. If a corporation becomes a subsidiary of another company, it needs a new EIN. However, it does not need a new EIN if it becomes a division of another corporation or following a corporate merger. To better understand the differences between the corporate changes and when to apply for an EIN, consult with an attorney.

How Can I Locate a Lost EIN?

If you have misplaced your EIN, you have several options for finding it, including:

  • Locating the EIN notice, which you may have saved as a PDF or printed and stored a print version.
  • Reviewing your bank records and contacting your bank.
  • Checking your prior government filings, including tax returns and license applications.
  • Searching your state's business search tool.
  • Using the Tax Exemption Organization Search if your business is a 501(c)(3) nonprofit, and
  • Contacting the IRS Business & Specialty Tax Line at 1-800-829-4933. This option is available only to those whom the business has authorized to receive the EIN, including business owners and corporate officers.
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