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Do I Need an EIN for Business?

Updated: Dec 20, 2022

An Employer Identification Number (EIN) is a Federal Tax Identification Number issued by the IRS to identify a business entity or organization. Do you need an EIN for your business? I'll outline this information below.

Sole proprietors and Single Member LLCs are not required to apply for an EIN unless any of following are true:

  • You have or are planning to hire employees.

  • You purchase, inherit, or change ownership of a business.

  • You operate your business as a corporation or partnership.

  • You change the business structure to a multi-member LLC or other structure.

  • You file a tax return for Employment, Excise, or Alcohol, Tobacco and Firearms.

  • You withhold taxes on income, other than wages, paid to a non-resident alien.

  • You have a Keogh plan.

  • You're involved in any of these organizations:

    • Trusts, except certain grantor-owned revocable trusts, IRAs, Exempt Organization Business Income Tax Returns

    • Estates

    • Real estate mortgage investment conduits

    • Non-profit organizations

    • Farmers' cooperatives

    • Plan administrators

When you declare your business' legal and tax structure, you can apply as a:

  • Trust

  • Estate

  • Sole Proprietor

  • Limited Liability Company

  • Partnership

  • Corporation

How Do I file for an EIN?

You can apply for an EIN by mail, fax or online from the IRS website. It's free and after answering a few simple questions online, your nine digit EIN is issued immediately (it takes at least 4 weeks if applications are sent via mail or fax).

The requirements for an EIN include the principal business must be located in the United States or its territories and the person applying must have a valid social security number, individual taxpayer identification number or employer identification number to apply. Your EIN number does not need to be renewed and is yours until you close your business (don't forget to notify the IRS to avoid identity theft).

When do I file for an EIN?

Once your business has been legally formed through your state, you can apply for an EIN.

Why should I file for an EIN?

As mentioned before, sole proprietors and SMLLCs are not required to obtain an EIN (unless they meet certain criteria), but there are many advantages to filing for one:

  1. It's free and takes less than 5 minutes.

  2. It protects you from identity theft because you are not having to share your social security number in relation to your business activities.

  3. It keeps your business and personal finances separate.

  4. When you are hired as an independent contractor, there's no risk of you being considered an employee of the business hiring you.

  5. It gives you professional credibility.

  6. You may need it to open bank accounts or credit cards for your business.

  7. Your state law may require it.

DISCLAIMER: This website is for informational purposes only - the information provided on this website does not, and is not intended to constitute financial or legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information may not constitute the most up-to-date legal or other information. Readers should contact their CPA and/or attorney to obtain advice with respect to any particular matter.

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