FAQs: Employer Identification Number (EIN)

Who Needs One, How To Apply For An EIN and What They Are Used For in Business

The majority of women business owners in the private sector own sole proprietorships. This type of business structure may not require an employee identification number (EIN) from the Internal Revenue Service (IRS), but it is still a good idea to get one if you plan to have employees.

The IRS recommends business owners read Publication 15 to learn more about employer tax responsibilities which can be found on the IRS website: Read IRS Publication 15.

1
What is an EIN?

Business man filling out a tax form
Tiago Estima

An EIN is a unique number assigned to your business by the IRS. The number has nine digits in the following format: 12-3456789.

Social security numbers also have nine digits, but can be easily distinguished from EINs as they are done in the format 123-45-6789 (note they both have the same numbers but different placement of hyphens.)

Learn more about EINs:

2
What is an EIN Used For?

An EIN serves a purpose for a business similar to that of a social security number for an individual. An EIN is used on tax returns, business licenses and business permits, and any applications or forms that require you to fill in an IRS number to specifically identify your business.

You can also use an EIN when you open a business bank account to further help separate your business and personal expenses.

3
Who Needs to Have an EIN?

All employers, no matter how small the business is, with one or more part-time or full-time employees, must have an EIN.

If you pay contractors, or anyone for services valued at more than $600 in a calendar year, you may also need to get an EIN.

Certain business structures require you to obtain an EIN.  For example, anyone who registers as a limited liability company, corporation, partnership, or joint venture must have an EIN.

4
Does a Sole Proprietorship Need an EIN?

If you do not have any employees, neither you nor your sole proprietorship is required to have an EIN. In fact, the IRS generally prefers you to use your social security number when you own a sole proprietorship.

However, even sole proprietorships, if you ever hire any employees,  must have an EIN.

Tip:  If you plan to use an EIN to differentiate between your personal and business finances, you should have an EIN before you apply for business permits.

5
How do I get an EIN?

You can apply for an EIN online for free from the IRS in less than 10 minutes. If you get an EIN online, you can begin using your EIN immediately.

You can also apply by FAX, phone, or mail (restrictions apply, so be sure to read the complete IRS guidelines before applying so you know which method is best for you.

International applicants may call 267-941-1099 (not a toll-free number) 6:00 a.m. to 11:00 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

No matter how you apply, it takes up to two weeks for your assigned EIN to be input into the IRS data base.

Apply Online for an EIN (IRS Website Link)

6
When You Might Need a New EIN

In general, if you change your business structure, you will need a new EIN. Also, if you are a sole proprietor and file for bankruptcy, you will need to have an EIN if you did not have one before.

If you were operating as a sole proprietor and incorporate your business, add a business partner, or purchase on inherit and existing business you are now operating as a sole proprietorship, you will need a new EIN.

There are also many instance in which existing corporations, partnerships, and limited liability corporations need to apply for a new EIN, you can learn more about some of these situations in "When Your Business Needs a New Employer ID Number".

For a comprehensive list of requirements see the IRS's webpage on "When You Need a New EIN."

If You Have Employees You Need an EIN From the IRS

An EIN is important because it can be used to distinguish your business financial data from your personal finances. All employers must have an EIN to do business, but if you own a sole proprietorship and have no employees, the IRS does not require you to get one. In some cases, even if you already have an EIN you may need to apply for a new EIN.

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