Fact checked for accuracy by Janet Berry-Johnson, CPA.
Employer Identification Numbers, or EINs, are essential for tax identification and record-keeping for companies operating in the United States. This guide will discuss what these are, when you might need them, how to get them, and related matters.
What is an EIN?
An EIN is a nine-digit number that the IRS assigns to businesses that meet the requirements for having them, which you’ll learn more about in the next section. These numbers come in the XX-XXXXXXX (2 digits-7 digits) format. Currently, the first two numbers represent the location assigning the number, while the remaining seven numbers serve as the actual identification.
EINs have many uses for modern businesses, so some experts recommend obtaining one even if you aren’t obligated to. EINs are free, although you may have to pay a small fee if anyone helps you with the paperwork, and some states may have other requirements.
Remember that an EIN is a federal identification number. Cities, counties, states, and other relevant entities may have local rules and guidelines for registering your business and tracking information about taxes, payments, and related matters.
When Does the IRS Require an EIN?
You must have an EIN if you meet any of the following criteria:
- You have employees other than yourself (i.e., some sole proprietorships do not need EINs)
- You are running your business as a partnership, LLC, or a corporation
- You are filing employment, alcohol, and tobacco, or firearms returns
- You are withholding taxes on income that have been paid to a non-resident immigrant
- You have a Keogh plan
- You deal with housing, trusts, mortgage investment and conduits, non-profit, plan administrators, or farmers co-ops (with a few exceptions)
While these are the only times the IRS requires an EIN, other businesses and organizations might ask you for one. This occurrence makes these numbers useful even for sole proprietors, so it’s often better to obtain an EIN whether or not you explicitly need one.
What is an EIN Used For?
The most important reason for getting an EIN is for filing and keeping track of tax information. The IRS uses EINs to help track payroll taxes, which is why you need one before you can start hiring employees.
You may also need an EIN to register for state employer taxes, which typically happens after you deal with your federal paperwork.
EINs have several uses outside of governmental obligations. The most important consideration for many business owners is that lending institutions like banks and credit unions usually require EINs before you can open business accounts with them. If you don’t have separate accounts, it’s much harder to keep all your accounting information straight.
Business loan applications often need EINs, too. While lenders may not specifically require your EIN, they might want to ensure you have a business bank account. As noted above, you’ll need an EIN for that.
Some lenders will also check your business credit before extending an offer. You can often build credit easier once you have an EIN, especially if you start early.
Outside of lending, EINs are useful for helping prevent identity theft. Businesses can typically use EINs in any situation where a partner, client, or vendor would need your Social Security Number, which gives you an extra layer of protection.
For sole proprietorships, EINs help build trust with partners and vendors. Having an EIN is a way of demonstrating that you’re a registered and legitimate business, not just someone trying to steal from vendors before disappearing into the night.
There are few situations in which having an EIN is bad, and on the other hand, in many cases, it can help you accomplish things faster and easier than you otherwise could.
How to Get an EIN
The best way to get an EIN is to apply online through the IRS. Unlike most parts of setting up a business, it’s intentionally difficult to automate this. The IRS limits numbers to one responsible party per day, so you’ll need to sign onto things even if you’re hiring someone to help you through this process. Getting an EIN is an important part of your checklist after forming your business.
In this context, a responsible party is a principal officer, general partner, grantor, owner, or trustor, who must be an individual instead of a business entity. The IRS has more information on responsible parties here. The main exception is if you’re applying as a government entity, in which case the responsible party doesn’t need to be a person.
To get your EIN, click the link at the top of this section and look for a large button marked “Apply for an EIN online.” The form itself may change occasionally, but the following guidelines should still apply.
The IRS will ask you several questions during the application, such as the type of business you’re forming, how many people are involved, and why you’re applying for the EIN. You can also expect sections for verifying your identity (using your SSN), entering your address(es), and so on. In most cases, the process only takes a few minutes.
Alternatively, you can file Form SS-4 with the IRS or use an LLC formation service. You can mail or fax this form to the IRS (with addresses and numbers available in the instructions for this form). Mailing or faxing your form isn’t as fast as applying online, but it works as a backup if the IRS website is unavailable.
International applicants, or people who do not have any legal residence, principal place of business, or principal office or agency in the United States or its territories, can apply for an EIN by telephone at 267-941-1099 during accepted business hours. This number is not toll-free, so be careful of any additional phone charges.
Currently, telephone applications are only available to international applicants. All other applicants must use the online form, mail Form SS-4, or fax Form SS-4 to the appropriate address.
Would I Ever Need to Get a New EIN?
Yes, there are some situations where you’ll need a new EIN. The rules for this depend on the type of business you have, so what holds to some companies won’t apply to others.
Corporations
Corporations must obtain a new EIN if:
- Your secretary of state gives your company a new charter
- You change your business to a partnership or sole proprietorship
- You are part of a new corporation formed after a statutory merger
- You become the subsidiary of another corporation
- You are a subsidiary of a corporation using the parent company’s EIN
Corporations generally don’t need to obtain new EINs if they change names or locations, decide to be taxed as an S corporation, are simply a division of an existing business, or are part of a surviving corporation that uses the old EIN after a merger.
Estates
Estates with EINs must change them if you create a new trust with funds or represent an estate that operates a business after the owner’s death. Note that the rule on trusts does not apply if it is merely a continuation.
Limited Liability Companies
Limited liability companies are generally treated as corporations, partnerships, or disregarded entities. If you (as an individual) own a disregarded entity, the IRS will treat you as a lone proprietor. If a company is owned by anyone or anything besides an individual, the IRS will treat it as a division or branch of the business.
Partnerships
Partnerships must obtain an EIN if:
- You incorporate your business
- A member takes over the partnership, and it becomes a sole proprietorship
- You terminate an existing affiliation and start a new partnership
Partnerships do not need to obtain another EIN if a new partnership forms under IRC Section 708(b)(2)(B), as such associations are considered continuations rather than new entities.
Sole Proprietors
Sole proprietors must obtain an EIN if any of the following occur:
- You go through a bankruptcy proceeding
- You incorporate your business
- You add partners to your business
- You inherit or buy an existing business that you intend to run as a sole proprietorship
You do not need to obtain a new EIN if you change your business name, change your location, or operate multiple businesses not subject to the clauses above.
Trusts
Trusts must obtain an EIN if:
- One person is the maker or grantor of multiple trusts
- A trust becomes an estate
- An inter-vivos or living trust becomes a testamentary trust
- A living trust terminates and distributes property to a residual trust
How to Look Up an EIN
There are several ways to look up an EIN. If you’re looking for your own, you can contact the IRS (usually by phone) or ask anyone who has the EIN on file, such as a bank. Note that you may need to provide proof of identity.
Unfortunately, there’s no publicly accessible database of EINs that you can use to research any company. However, if you’re trying to look up someone else’s EIN, there are several options.
If the company trades stocks publicly, you can try using the U.S. Securities and Exchange Commission’s EDGAR system to look up their company information. Regular entries will include their primary business address, filing category, state of incorporation, and EIN.
Guidestar has a similar database for nonprofit organizations, most of which have EINs.
If neither of these suits your needs, consider simply contacting the business and asking for their EIN. Most companies will readily provide this information to anyone with a reasonable need to know it. Alternatively, online records and filings for the company may contain the number you’re looking for.
Does a DBA Need an EIN?
No. In most cases, DBAs are merely alternative names for the business, and the IRS usually doesn’t assign a new EIN if you’re changing the company’s name.
To put it another way, an EIN is essentially the “real” name of a business. It’s a persistent identifier that clearly states which company is involved with bank accounts, tax filings, and other paperwork, regardless of its locations or branding. This name simplifies matters for tax reporting purposes, especially when dealing with companies that change names regularly.
Note that you’ll generally need to report a new DBA to the IRS and other entities, even if you aren’t filing for a new EIN at the same time.
You can use the same EIN across multiple DBAs if they’re all part of one specific business. You will need various EINs for separate companies, even if you’re reusing the same DBA between those businesses in different areas.
Is There Any Difference Between an EIN, TIN, or FEIN?
Yes. While these numbers serve similar purposes, they are different things.
A Taxpayer Identification Number (TIN) is any number the IRS or the Social Security Administration assigns as a unique identifier. This number is the parent term for all tax identifiers that various entities may ask for, including Social Security Numbers.
As discussed in this guide, the Employer Identification Number (EIN) is a unique nine-digit identifier for businesses. This number is a type of TIN and the most common type that firms in the United States use. However, states may have an EIN separate from the federal one, so this term technically refers to federal and state numbers.
A Federal Employment Identification Number (FEIN) is, specifically, the EIN assigned by the IRS. The IRS uses this number to differentiate which number somebody is asking for when there could be some confusion, such as operating in a state that assigns a local employer identification number.
The Last Word
To recap, EINs are critical for record-keeping and tax purposes for companies in the United States. Still have questions about EINs or how to set up your business? Let us know, always happy to help any way we can.
Filed under: Advice Columns
