What Is an EIN and How Does It Work?
An EIN is a nine-digit identification number assigned to businesses by the Internal Revenue Service (IRS). Sometimes called a Federal Employer Identification Number (FEIN) or a Federal Tax Identification Number (FTIN), an EIN is often compared to an individual’s Social Security number (SSN).
There are several reasons why a company would need an EIN, including:
- Complying With Tax Identification Requirements: The IRS uses EINs to keep track of businesses for tax purposes. All businesses required to file a business tax return must have an EIN.
- Hiring Employees: Every business with employees must have an EIN. Even if your business doesn’t have employees and isn’t required to file a business tax return (like some sole proprietorships), it may be a good idea to get an EIN in case you decide to hire employees in the future.
- Opening a Business Bank Account: Most banks require businesses to have an EIN to open a business banking account. This requirement also applies to business credit cards and other lines of credit.
- Maintaining Your "Corporate Veil": The “corporate veil” represents the legal boundary between a business and its owners. This is particularly important in a single-member LLC — a business structure that makes it critical for the owner to keep their personal finances separate from those of their company. Having an EIN can help strengthen this separation and potentially provide more personal liability protection.
- Protecting Against Identity Theft: Having an EIN allows single-member LLCs and sole proprietorships to avoid using their personal Social Security Number (SSN) for business purposes. This decreases the chances of identity theft.
Do I Need an EIN?
The IRS requires the following business types to have an EIN:
Additionally, any business with employees must have an EIN. So, even if your business is a single-member LLC or a sole proprietorship, it will need an EIN if you have employees.
How to Get an EIN Number
- Online: The quickest way to get an EIN is to apply online. This option is available to all entities whose principal office or business location is within the United States or a U.S. territory. You will receive an EIN immediately if you apply online.
- By Fax: You also can complete Form SS-4 and fax it to the IRS. Read the provided instructions to find the proper fax number. If you provide a return fax number, the IRS will typically send back your EIN within four days. This option is available to all entities whose principal office or business location is within the United States or a U.S. territory.
- By Mail: Alternatively, you can mail Form SS-4 to the IRS. Read the provided instructions to find the proper mailing address. The processing time for mailed applications usually takes about four weeks. This option is available to all entities whose principal office or business location is within the United States or a U.S. territory.
- By Phone: International entities must apply for an EIN by phone. The number is 267-941-1099. The person calling will need to provide the same information that’s included on Form SS-4.
EIN Number FAQ
What does EIN mean?
EIN stands for Employer Identification Number.
Do I need an EIN for a sole proprietorship?
The IRS only requires sole proprietorships with employees to obtain an EIN. However, it’s recommended that even sole proprietorships with no employees apply for an EIN.
How much does an EIN cost?
There is no cost to obtain an EIN.
Is an EIN free?
Yes! EINs are free if you obtain them yourself from the IRS.
Can I look up my EIN?
You can typically find your EIN on any official documents from the IRS (including tax returns), business loan documents, and business licenses or permits. You also can contact the IRS to look up your EIN.
What is a tax ID number?
A tax ID number is another name for an EIN when it’s used in the context of taxes.
Can I change my EIN from a sole proprietorship to an LLC?
No. You will need to apply for a new EIN if your business structure changes.
Does an EIN expire?
No, an EIN doesn’t expire and doesn’t require renewal.