What is an EIN?
An employer identification number is a distinct nine-digit number that the IRS assigns to business entities that operate in the United States. Your EIN is typically permanent and doesn’t need to be renewed.
Why and when you should apply for an EIN
Getting an EIN is important if you’re starting a business because you usually need one before you can file your business’ taxes, apply for a business loan, open a business checking account, build business credit or hire employees. You may want to considergetting an EINif you:
- Have a business with employees, including sole proprietors
- Purchase or inherit a business
- Start a multi-member LLC
- Own any business entitythat’s taxed as a corporation
- Change the structure or ownership of your business
Related: How to Hire Your First Employee
How to apply for an EIN
To apply for an EIN, you can fax or mail Form SS-4 to the IRS. It’s much faster online so keep in mind these steps:
1. Visit the IRS website
The EIN online application page clarifies the eligibility requirements and time restraints. Click the button that says "Apply Online Now."
2. Declare your business entity’s legal and tax structure
You can apply as a:
- Trust
- Estate
- Limited liability company (LLC)
- Corporation
- Partnership
- Sole proprietor
3. Provide information about the members if your business operates as an LLC
You can specify the state where your LLC is located and the number of members you have. If you have a single-member LLC, the IRS may classify your business as adisregarded entityat first. The IRS typically classifiesmulti-member LLCsas partnerships during their initial review.
4. Explain your reason for requesting an EIN
You can select from these choices:
- Purchased active business
- Changed type of organization
- Banking purposes
- Hired employees
- Started a new business
5. Identify the responsible party
This is a contact person who’s responsible for handling the business’ tax matters. You may need to supply their name and Social Security or Individual Tax Identification Number.
6. Supply a physical address and phone number for your business
This can be any address and phone number that’s related to your business.
7. Provide important details about the business entity
You will be asked to provide the business entity’s name, trade name (if applicable) and start date. The legal name should usually match the articles of formation and leave off corporation name endings.
8. Answer a series of tax-related questions
The application will ask you questions about alcohol, tobacco and firearms, quarterly federal excise tax returns, gambling and vehicles. A majority of people answer "no" to all of these questions.
9. Choose an applicable business category
The application then typically provides a list of categories that signal what your business does. If you’re unable to find an accurate category, you can click on "other" to go to another page of options. If you’re still unable to find an appropriate choice, you may choose "other" again and manually type in your response.
10. Choose how you want to receive your confirmation information
The IRS typically allows you to receive your EIN confirmation by mail or online. If you choose mail, you should receive it in about four weeks. The online method often allows you to view the letter immediately.
11. Review your EIN application
Read through theapplication to ensure that all the information you provided is correct before submitting it.
Frequently asked questions about EINs
How much does an EIN cost?
There is no charge if you fill out the application using the IRS website.
How long does it take to receive an EIN once you apply?
You may receive your EIN immediately if you apply online. It usually takes at least four weeks if you apply via mail.
Is an EIN the same as a tax ID?
An EIN is a type of federal tax identification number that’s specific to businesses.
When is the advantage of having an EIN number? Can’t I just use my social security number?
You can use your SSN in lieu of an EIN, but an EIN is a preferred alternative to using your SSN because it can help keep your business and personal finances separate, effectively reducing the risk of identity theft.
