Takeaways
- An EIN is a unique nine-digit number the IRS assigns to a business entity.
- An EIN gives the IRS a quick way to identify a business for tax reporting purposes.
- Businesses can apply for EINs for free online on the IRS website.
- Businesses need an EIN to start regular business operations and hire employees.
- An EIN allows businesses to apply for business credit cards, set up bank accounts, and apply for traditional business loans.
What Is an EIN?
An EIN stands for Employer Identification Number. Businesses request a unique number from the Internal Revenue Service (IRS) to differentiate their business entity for tax purposes. The number is nine digits and reads in XX-XXXXXXX format.
If you have started your own business, you must get an EIN. This applies to all business types, including a C Corporation, Limited Liability Company, Sole Proprietorships, or Partnership. Keep your EIN safe and secure because you will need it for business applications.
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How an EIN Works
Think of an EIN as a business's Social Security Number. This unique number allows businesses to open bank accounts, get credit cards, apply for business loans and pay taxes.
Companies must obtain an Employer Identification Number before beginning operations. The IRS does not care about employer size, so even a business with one employee is technically eligible for an EIN.
Learn More: What Is a Small Business Administration (SBA) Loan?
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How to Get Your EIN
You can obtain an EIN by applying online, by fax, by mail, or by telephone. To get an EIN, you do not need to pay any taxes or fees. And you may only apply for one EIN per day per responsible party.
If you apply for an EIN online, make sure you can dedicate 15 to 30 minutes to fill out the form in one sitting. When you are filling out your application, the IRS system will kick you out after 15 minutes of inactivity.
Applicants must fill out Form SS-4, available on the IRS website. The IRS prefers applicants apply online, as it is the quickest way for the IRS to process their application and issue their EIN. Online applicants receive their EIN immediately, while other methods can take up to four weeks.
Once you receive your EIN, print your number and letter to keep in your records. Because your Employer Identification Number is used in so many business operations, like establishing bank accounts, you should store it in a safe and accessible place.
Read Also: What Is a Form W-2?
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5 Benefits of an EIN
The benefit of an EIN is that it separates your business from other entities. No two companies will ever have the same EIN. An EIN never expires or is reused; even if a business closes, it is unique to each business forever.
An EIN is required for businesses to be able to run day-to-day operations—everything from hiring employees to opening bank accounts. Your business's unique nine-digit number also keeps your personal tax information separate from your company.
Here are five benefits to getting your EIN so you can get your business up and running:
1. Banking Account
An EIN allows you to open bank accounts for your business. Having separate business accounts prevents your personal funds from getting mixed in with business funds and vice versa.
Having separate records is critical to long-term business management, especially when reporting income on your tax returns. (Here are our picks for the best high-yielding bank accounts).
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2. Credit Card
According to a survey conducted by Forbes, 44% of businesses use credit cards to fund their operations.[1] Credit cards can help you get your business up and running and fund starting costs, like running your website, paying vendors, or getting office supplies.
Establishing business credit also helps set your business up for borrowing in the future. (Read about how to boost your credit score).
3. Business Loans
An established business can apply for a business loan with their Employer Identification Number, which reflects their business credit score.
You may need personal credentials and collateral to secure funding if your company is new. Either way, you need an EIN to apply for a business loan. (Read about 9 Ways to Fund Your Business).
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4. Hiring Employees
When you hire employees, you are responsible for collecting taxes according to their Form W-4 withholdings.
As a business owner, you need an EIN to report taxes correctly, accurately, and on time. You must have an EIN before you officially hire any employees.
5. Filing Business Taxes
Your tax payments and associated financial records are all tracked using an EIN. The IRS uses this number to reconcile your return against those records.
Businesses require an EIN to file a tax return. (Read about the 7 Steps to File Your Taxes).
What Businesses Need an EIN?
Your business needs an Employer Identification Number if: [2]
- You have employees
- You operate as a corporation or partnership
- You file employment, excise, or alcohol, tobacco, and firearms tax returns
- You withhold taxes on income, besides wages, paid to a non-resident alien
- You run a non-profit organization
- Have a Keogh plan
- You are involved with certain types of trusts and estates
Self-employed people may not need to get an EIN, but they still can. There are benefits to having one, even if you are self-employed.
Having an EIN as a self-employed individual offers you the same benefits corporations receive. You can separate your personal finances from your business finances. Using an EIN lets you keep your personal information private, like your Social Security Number.
Differences Between an EIN and a TIN
An EIN is a number issued to businesses by the IRS, allowing them to operate like individual entities. A TIN, or tax identification number, is a category of identifier the IRS uses for tax reporting. An EIN is a type of TIN.
Types of TINs include:
- Social Security number (SSN)
- Employer Identification Number (EIN)
- Individual Taxpayer Identification Number (ITIN)
- Taxpayer Identification Number for Pending U.S. Adoptions (ATIN)
- Preparer Taxpayer Identification Number (PTIN)
Smart Summary
An Employer Identification Number is a unique nine-digit number issued to businesses by the IRS. Your company is required to have an EIN to carry out regular operations. Your EIN is used to conduct all business activities, from hiring your first employees to issuing company credit cards. You can quickly obtain your business's EIN for free by filling out an application on the IRS website.
(1) Forbes. Business Credit Cards: Statistics And Trends in 2024. Last Accessed January 12, 2025.
(2) Internal Revenue Service. Do You Need an EIN? Last Accessed January 12, 2025.
