You’ve heard time and time again that an EIN is essential for forming your business. But what exactly is an EIN, and how do you obtain one?
Understanding the EIN
EIN stands for Employer Identification Number, and is necessary to establish your business as a separate legal entity from yourself. Just as every U.S. citizen must have a Social Security Number, every business must have an EIN that identifies it as a unique entity. The EIN is often also referred to as the Tax ID Number, or TIN; some also say , though this is redundant when the N in EIN stands for Number.
Who Needs an EIN?
Anyone who intends to operate as a business can file for an EIN, though sole proprietors without employees aren’t required to do so. If you intend to hire employees even as a sole proprietor, though, you need to ; you will also need an EIN if you form a partnership or LLC, inherit a business as a sole proprietor, file for bankruptcy, or have a retirement plan as part of your business. Otherwise, sole proprietors can use their SSN, though an EIN may still be necessary when opening business bank accounts.
However, all other business types, including S-Corps, C-Corps, and LLCs, are required to have an EIN. Trusts and pension plans may also need an EIN to operate. Other instances requiring an EIN include acting as representative of an estate that continues to operate a business after the death of the owner.
Completing the EIN Application
To apply for an EIN, you must complete and submit the appropriate application form for the type of business you seek to establish. If you’re having difficulty making that determination, our wizard will walk you through selecting the proper business type with a few simple questions, then guide you through the application process. You’ll receive your EIN by email once the application has been filed, processed, and approved.