Does Your Business Need an EIN?

What is an Employer Identification (EIN) Number?

An EIN number (also called a "Federal Tax Identification Number") is a nine-digit number assigned by the IRS to your business. The EIN number is used by the IRS to identify the tax accounts of employers so they can file business tax returns. If your business is an LLC or Corporation, it is likely that you will want an EIN.

When do I need an EIN?

You are required by the IRS to have an EIN number if:

  • You have employees
  • You operate your business as a corporation or a partnership
  • You file tax returns such as: 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 are involved with certain Trusts, Estates, Real estate mortgage investment conduits, Non-profit organizations, Farmers' cooperatives, or Plan administrators.

LLC owners also use the EIN number to carry out activities that would otherwise require a Social Security Number. You will need an EIN to:

  • Open a business bank account for your state-approved LLC (for more information on opening a business bank account, see How to Open a Business Bank Account.
  • Apply for credit for your LLC
  • Apply for business permits
  • Give any independent contractors your LLC uses a Form 1099

Do I need an EIN number if I operate a small company as a sole proprietor?

As long as the company does not have employees, and the sole proprietor does not file pension plan or excise tax returns, an EIN number is not needed. In place of an EIN number, the sole proprietor will use his/her social security number as the tax identification number for the company.

If you create your LLC or Corporation with TotalLegal, you can choose to have TotalLegal obtain your EIN for you.