An Employer Identification Number (EIN) is a unique nine-digit number that identifies your small business when you file taxes, open a business bank account, get a business loan, or do other business activities. Many, but not all, small businesses are required to get an EIN.
If you have employees that you need to pay, you must have an EIN. Make sure you are adhering to this and other federal regulations by using Gusto, our recommended payroll service provider. They’ll help ensure that all of your records are correct, saving you from the headache of nasty tax-time penalties.
How to Get An EIN – Cost, Online Application, & Form SS-4
Getting an EIN is absolutely free. You may apply for an EIN online, by fax, or by mail. Online is the easiest and fastest method.
To apply online for an EIN, click here. The online questionnaire takes about 10 minutes, and there are no forms to fill out. You will receive an EIN right away online, and it can be used immediately for most business purposes. However, you will need to wait about 2 weeks before you can use the EIN to file taxes electronically.
Paper Or Fax Application (Form SS-4)
If you’d rather apply by mail or fax, you will first need to fill out an IRS Form SS-4 Application for EIN. Form SS-4 is an easy 1-page form to fill out. You will need the following information to complete the form:
- Business name and address
- Responsible party for the business (generally the same person who is completing the form. This can be an owner, partner, or officer of the business).
- The SSN of the responsible party
- Reason you need an EIN
- Type of business you have (e.g. Corp, partnership, LLC, nonprofit, etc.)
- If LLC, number of members
- Date the business started and number of employees
- Last month of your business’ accounting year
There’s also a question on Form SS-4 which asks if your estimated employment tax is under $1,000. If it is, you can file Form 944 annually instead of Form 941 quarterly to report estimated employment taxes. Businesses must submit form 941 or 944 to the IRS if they withhold income taxes, social security taxes, or medicare taxes from employee wages.
Faxed SS-4 applications take about 1 week to process. Mailed applications take about 4 weeks to process.
Who Needs An EIN
If you’re still reading this article, you’re probably wondering, “do I Need an EIN?” If you answer yes to any of the following questions, the IRS says you need an EIN:
- Do you operate as a corporation, partnership, multi-member LLC, or non-profit organization? (Learn more about business structures here)
- Do you have employees (including your spouse or children)?
- Do you have a Keogh plan (a tax deferred retirement plan for self-employed individuals)?
- Do you file an Employment, Excise, Alcohol, Tobacco, or Firearms tax return?
- Do you withhold taxes on income other than wages paid to a non-resident alien?
- Are you involved with a trust, estate, real estate mortgage investment conduits, farmers co-op, or plan administrator?
Beyond this, you may also need an EIN if you plan to do the following:
- Ask vendors to pay you for goods or services provided – When you perform work for a vendor, the vendor will most likely ask you for a W-9 form before they pay you. A W-9 form gives the vendor information it needs to files tax returns. On the W-9 form, you must provide an EIN to identify your business.
- Open a business bank account (we recommend Bank of America)
- Get a business loan
- Get a business credit card
- Build business credit – Just like a personal credit score, every business has a business credit score. Suppliers and lenders may check business credit to determine if they want to work with you. Learn more about business credit here.
- Apply for government licenses or permits or bid on government contracts
- Supply Form 1099s to independent contractors – You must issue a 1099 to any independent contractor that you pay $600 or more in one year. If that applies to you, you need an EIN even if you don’t have employees. Ask your accountant or tax professional for more details.
The bottom line is that, unless you are a sole proprietorship or single member LLC with no employees, you are required to have an EIN number. And even if you do fall into one of those categories, you may still need an EIN when getting a business loan, business credit card, or engaging in other business activities.
Benefits Of Getting An EIN (Even If You Don’t Have To)
Certain types of businesses, such as sole proprietorships and single-member LLCs with no employees, legally don’t need to get an EIN. The owner can use their Social Security Number in lieu of an EIN when filing taxes and doing most other business activities.
However, there are benefits to getting an Employer Identification Number even if you are not required to get one:
1. An EIN keeps business and personal finances separate
In our Small Business Bookkeeping and Accounting guide, we discuss the importance of keeping your personal finances separate from your business finances; an EIN allows you to do that. When you use an EIN, the IRS, banks, credit card companies, and others with whom you do business can track your business finances independently of your personal finances.
2. Preserve limited liability for single-member LLCs
One of the benefits of having an LLC is that you are not personally liable for the business’ debts or obligations. Having an EIN number for your business can help establish that your business is a separate entity, which helps preserve limited liability if your business is ever sued. Other business structures that offer limited liability, such as corporations and multi-member LLCs, are required to have an EIN.
3. Reduce identity theft
Sole proprietors often provide their SSN to suppliers, lenders, and others in lieu of an EIN. This can make you more vulnerable to identity theft. Eric Yaillen, President and CEO of The Identity Defenders, a firm which provides identity protection services for businesses, says, “AN EIN won’t eliminate your chances of falling victim to identity theft (especially since small business is a popular target), but at least your personal accounts will not be at stake.”
Also, keep in mind that your business needs may change over time. You may start as a small sole proprietorship with no employees but may end up hiring staff after a few months. At that point, you will need an EIN even if you didn’t at the beginning. Check out our guide on How to Do Payroll Accounting to learn how to calculate, pay and file your payroll taxes.
When You Need A New EIN
In most cases, once you get an Employer Identification Number, it will be yours for the life of the business. However, there are a few specific cases where you would have to get a new EIN:
- You change business structures (e.g. a sole prop becomes a partnership or a corporation)
- A partnership is terminated and a new partnership is started
- You purchase or inherit a business (learn more about business acquisitions here)
- Corporation receives a new charter from the secretary of state
- You become a subsidiary of a corporation
- Sole proprietorship declares bankruptcy
You do NOT need a new EIN for the following:
- Business name changes
- Business location changes
- Operate multiple businesses
- Corporation or partnership declares bankruptcy
For more details on when you need a new EIN, click here.
What To Do If You Misplace Your EIN
Try to keep your EIN letter in a safe place if you applied by fax or mail. If you applied online for an EIN, you will be given an opportunity to note down the number in a safe place or to print out a confirmation of your EIN. If you use an accounting software like QuickBooks Online, you can scan important documents like your EIN letter and store them in your system for quick reference.
However, if you do lose it, it’s relatively simple to retrieve. You can look up an old tax return or bank records to find it. Alternatively, you can call the IRS’ Business & Specialty Tax Hotline at (800) 829-4933 and select EIN from the list of options.
Once connected with an IRS employee, tell the representative you lost or misplaced your EIN. The representative will ask you some security questions before providing the number. The business owner or other responsible business parties should call. The hours of operation are 7:00 a.m. – 7:00 p.m. local time, Monday through Friday.
Bottom Line: Employment Identification Numbers
An Employer Identification Number (EIN) can be a legal requirement for many small businesses, but even if it’s not, we’ve covered a number of good reasons to get an EIN. Don’t forget to check out Gusto, an all-in-one payroll and HR solution that automatically calculates, files, and pays your payroll taxes to help you avoid payroll headaches.