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- You can apply for an EIN online or by mail
- An EIN helps you separate personal and business finances
- If you pay employees and file payroll taxes, you must have an EIN
Keeping your personal and business expenses separate is crucial as a business owner, and an Employer Identification Number (EIN) is the best way to do so. An EIN number can help you keep your Social Security number (SSN) safe and secure, plus it will make your business look more legitimate to potential clients and customers. Knowing how to get an EIN, why you should get it and where to apply for an EIN can help you decide if it’s the right step for your business.
What is an EIN?
An EIN is your business’s state and federal tax ID numbers. The IRS assigns the EIN, which is unique to your business, just like your social security number is unique to you. Rather than being formatted like a personal SSN 123-45-6789, an EIN number is in the format 12-3456789.
Why should a small business get an EIN?
There are several reasons why a small business should get an EIN. Suppose your business is structured as a sole proprietorship without employees or a single-member LLC classified as a disregarded entity with no employees. In that case, you can choose between using your SSN or EIN for tax purposes. However, having an EIN number lets you separate your business and personal finances and protect your SSN, reducing your chances of identity theft.
Regardless of your business structure, you must have an EIN if you have employees to pay them and file payroll taxes. Other organizational structures also require an EIN, like:
- Having a tax-deferred pension plan like a Keogh plan
- Farmers coops
- Trusts, except some IRAs, grantor-owned revocable trusts and Exempt Organization Business Income Tax Returns
- Businesses paying taxes for alcohol, excise, firearms or tobacco
- Nonprofit organizations
- Real estate mortgage investors
An EIN makes applying for business bank accounts, credit cards and small business loans easier. It will also be helpful when applying for business licenses and permits you may need.
How to apply for an EIN
There are several ways to get an EIN. You can either apply by fax, mail or online. If you apply by fax or mail, you must fill out and submit the IRS Form SS-4.
If you need your EIN number fast, you can apply online. Getting an EIN from the IRS is free and will be issued immediately after applying. Here’s how to get an EIN number online in three steps.
Step 1: Determine your eligibility
To be eligible for an online EIN, the principal business location must be in the United States or one of its territories. The person applying also must have a social security number or other valid tax ID number.
The person applying must be a responsible party who directs, controls or manages the business and its finances. If someone other than the responsible party applies, the responsible party must sign the third-party designee portion of the SS-4.
Step 2: Gather information
Before applying for an EIN, make sure you have the correct information available. You’ll need to provide the following in the online EIN application:
- Legal name of the individual applying
- Business trade name
- Mailing and street address, if they differ
- County and state of principal business location
- Name of the responsible party and their tax ID number
- How many LLC members if applying as a limited liability company (LLC)
- Entity type
- State or foreign country of incorporation if the company is a corporation
- Reason for applying (starting a new business, hiring employees, buying a business, banking purposes, creating a trust or pension plan, etc.)
- Business start or acquisition date
- Accounting year closing month
- The highest employee number you expect within the following 13 months
- The first date annuities or wages were paid
- The principal business activity
- Whether the applicant has ever applied for or been issued an EIN previously
This information is also available in the PDF version of the Form SS-4.
Step 3: Apply for an EIN
The final step is applying for the EIN. After filling out the SS-4, you can apply by fax or mail. Immigrants or applicants overseas can also apply by phone. But if you’re applying online, you’ll need to access the IRS online tool.
The online EIN assistant will guide you through the application step-by-step. It is available from 1 am to 10 pm EST, Monday through Friday. As a security measure, the system will automatically log you out after 15 minutes, so ensure you have all your information ready. The responsible party can only apply for one EIN per business per day.
Once you complete the online application, you’ll get an EIN immediately. It takes four business days for faxed applications and around four weeks for mailed applications.
The bottom line
An EIN number allows businesses to keep their personal finances separate and safe, build business credit and pay employees. It can also help you access the best small business loans with favorable terms. The IRS website has an online tool to apply for an EIN and will instantly provide the tax ID number. The online process is easy and free.
Frequently asked questions
Once you have an EIN, you usually won’t need to change it or apply for a new one. However, there are some circumstances where you need to change your business EIN, like changing your business structure from a sole proprietorship to a corporation or being party to a bankruptcy case. You may also need to change your EIN if you operate as a sole proprietor when buying or inheriting an existing business.
If you lose your EIN, don’t panic. There are a few ways you can look up your business’s EIN. You can contact your bank if you used it to open your business bank account or find the automatic electronic notice you received from the IRS after applying. You can also check a previous tax return to find it, reach out to service providers, check W-9s you may have filled out or ask your tax professional. If you still cannot locate your EIN, contact the IRS Business and Specialty Tax Line during regular business hours for assistance.
Yes, an EIN is the same as a tax ID. The EIN number is your Federal Tax Identification Number and identifies your business entity. Think of your EIN or tax ID as your business’s social security number. When applying for a business loan or other forms of business credit, you may still have to supply your SSN as part of the documentation process.