An Employer Identification Number (EIN), also known as a Federal Tax Identification Number, is a unique nine-digit identifier assigned by the IRS to businesses operating in the United States. While the name suggests it’s only for employers, any business entity—including sole proprietorships without employees—may need an EIN for tax purposes, banking, and legal compliance.
The EIN serves as your business’s Social Security number, distinguishing your company from millions of others in federal databases and enabling everything from tax filing to opening business bank accounts.
When Your Business Needs an EIN
Required situations:
- You have employees (including yourself if you’re incorporated)
- You operate as a corporation, partnership, or LLC
- You have a Keogh plan or are involved in certain business structures
- You withhold taxes on income paid to non-resident aliens
- You’re involved in certain types of organizations (non-profits, etc.)
Recommended even if not required:
- Opening business bank accounts (most banks require an EIN)
- Applying for business licenses
- Setting up business credit
- Keeping personal and business finances separate
Many sole proprietors operate using their Social Security number initially, but getting an EIN provides better privacy protection and professional credibility.
How to Obtain an EIN
The IRS offers several application methods, but online application is fastest and free:
| Method | Processing Time | Cost | Best For |
| Online (IRS website) | Immediate | Free | Most businesses |
| Fax | 4 business days | Free | International applicants |
| 4-5 weeks | Free | No time pressure | |
| Telephone | International only | Free | Non-US entities |
Critical warning: Avoid third-party services that charge fees for EIN applications. The IRS process is free, and paying someone else just adds unnecessary cost and potential delays.
Understanding EIN Format and Usage
EINs follow the format XX-XXXXXXX (two digits, hyphen, seven digits). The first two digits indicate the IRS campus that issued the number, though this doesn’t limit where you can conduct business.
Key points about EIN usage:
- One EIN per legal entity (you can’t have multiple EINs for the same business)
- EINs don’t expire, but you may need a new one if your business structure changes significantly
- Keep your EIN confidential—it’s sensitive information that should be protected like your SSN
- You’ll use your EIN on tax returns, employment forms, business licenses, and banking documents
Common EIN Complications
Business structure changes: If you’re a sole proprietor who incorporates, or an LLC that elects corporate tax treatment, you typically need a new EIN. However, some changes (like adding partners to a partnership) don’t require a new number.
Lost EIN recovery: If you lose your EIN, the IRS doesn’t reissue the number easily. You’ll need to call the IRS Business & Specialty Tax Line with detailed business information to recover it.
International considerations: Non-US entities can obtain EINs for US business activities, but the process requires additional documentation and often involves phone or mail applications rather than online submission.
Frequently Asked Questions (FAQs)
Yes. The name “Employer Identification Number” is misleading—you can get an EIN even if you never plan to have employees. It’s useful for banking and business setup.
Online applications are processed immediately during business hours. You’ll receive your EIN as soon as you complete the application successfully.
Minor errors can sometimes be corrected by calling the IRS. Significant mistakes may require applying for a new EIN and formally closing the incorrect one.
No, EINs are federal identifiers that work across all states. However, you may need to register for new state tax IDs in your new location.
Yes, and this is recommended. Using your EIN helps establish business credit separate from your personal credit profile.
