Why and How to Get Your Employer Identification Number
An Employer Identification Number (EIN) is needed for a variety of actions your startup will have to take as it grows, from protecting your personal finances to applying for business banking services to filing tax returns. In this article, we outline all of the possible applications for an EIN and explore when, why, and how to apply for one.
What is an EIN?
An Employer Identification Number (EIN) is a unique nine-digit number used by the Internal Revenue Service (IRS) to identify your business for tax purposes. It’s formatted like this: 12-1234567.
EINs function for your business similarly to how a Social Security Number (SSN) functions for you as an individual. Employers generally use EINs to file for tax returns, and the IRS uses them to identify businesses.
Why and when you need an EIN
The role of an EIN in your business is significant. EINs can offer everything from the ability to bank to the assurance that your personal finances are safe from corporate debts.
- Business bank accounts: Most financial institutions require an EIN to open a business bank account, as well as to access other business services like loans, licensing, and credit cards. Business bank accounts can separate your professional and personal finances, and provide a degree of social proof to professional contacts that your company is legitimate.
- Landing your first hires: Building a team is an exciting part of a company’s development, but it isn't possible without an EIN. Every company in the U.S. that hires employees and contractors must have an EIN.
- Personal finance protection: The legal separation between a corporate entity and its business owners is known as the corporate veil. A strong corporate veil separates your business and personal taxes and can protect you against business liabilities—this veil is not impenetrable, but grows stronger with more fortifications. An EIN strengthens the corporate veil, because it adds additional separations for tax filing and identification between businesses and their owners.
- Secure personal identity: When your business has a distinct identity separate from your own, it creates a safe distance between you and your company and reduces the possibility of your private identity being stolen. Business operations require a degree of publicity that private lives don’t. For example, without separate identities, a form that needs a sole proprietor’s individual tax identification number (ITIN) will ask for your social security number (SSN). With separate identities, you can use your EIN instead of your SSN.
Who should get an EIN?
An EIN offers different benefits for different business structures.
- Single-member LLC or sole proprietorship: These businesses are made up of a single person and are not required to get an EIN. Instead, the founder’s personal Tax Identification Number (TIN), most likely their SSN, will also be used for business tax filings and identification. However, one-person companies can still opt to get an EIN and reap the benefits, like opening a business bank account and protecting their personal finances.
- Multi-member LLC or partnership: The IRS treats multi-member LLCs and partnerships identically when it comes to tax filing, even though the two are unique business structures. Both structures require an EIN to operate because their owners must file a partnership return and provide K-1 forms to members of their LLC or partnership.
- NPO: Although Non-Profit Organizations (NPOs) are charitable organizations, meaning that they are tax-exempt, they require an EIN. An EIN enables the NPO to apply for tax-exempt status. The IRS also uses the EIN to identify tax-exempt businesses.
- Corporation, trust, or estate: Corporations, trusts, and estates must have an EIN to operate. Certain trusts, such as revocable trusts, don’t always need an EIN. Be sure to investigate whether your type of trust requires an EIN.
What makes an EIN different?
There are many corporate acronyms out there, some of which appear confusingly similar to EIN. Here's a breakdown of common acronyms and how they relate to EINs.
- EIN versus TIN: A Tax Identification Number (TIN) is any number that can be used by the IRS to identify a tax entity. An EIN and an SSN are both TINs, for example—the first identifies your business while the latter identifies you. If you’re ever asked for your business’ TIN, provide its EIN.
- EIN versus SSN: EINs function for your business like SSNs function for you. A key difference is that SSNs generally need to be protected and treated as confidential information while EINs are much more publicly visible—you don’t need to safeguard your EIN. In fact, you may sometimes need to share your EIN with other businesses, such as with vendors who need your EIN for contractor payments.
- EIN versus FEIN: A Federal Employer Identification Number (FEIN), also called a Federal Tax Identification Number (FTIN), is a term that identifies an EIN as federal rather than state. If you have an EIN and it is not state-issued, you can assume that it is federally issued. A state-issued EIN is required in some states to pay state taxes. However, the term EIN most commonly refers to the FEIN, whereas state-issued EINs go by a few names, including state employer ID and state tax registration.
- EIN and LLC: An LLC is a type of business structure. Single-member LLCs can opt for an EIN to reap the benefits, but it’s not a requirement. Multi-member LLCs require an EIN.
Be sure to form your single- or multi-member LLC before applying for an EIN, as the EIN application asks for your approved business name and formation date. If you haven’t yet formed your LLC, you won’t be able to apply for an EIN.
- EIN and DBA: A Doing Business As (DBA) name is an alternative name you can give to your company that is different from its legal business name, like a nickname.
For example, if your business’ legal name is SuperCart Grocery Services Inc., but you operate under the name SuperCart, then SuperCart would be your DBA. A DBA is not a separate business entity from the legally-named business, so it does not require its own EIN—use the same EIN for the DBA as for the legal business name.
How to find an EIN
Once you’ve received an EIN, you can use an EIN lookup tool to help you find it at any time. These tools can also help you find other companies’ EINs if you need them for tax filing or informational purposes.
- Public companies: Any publicly-traded company’s EIN can be found using the lookup tool on the Securities and Exchange Commission (SEC) website. The tool is an Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system and it’s free to use.
- Private companies: This one is a bit trickier. You may need to contact the company’s accountant directly to request an EIN. Alternatively, you can try a private lookup service. These services are not free to use but there are usually free trials for first-time users.
- For employees: If you’re an employee, or your own employees are wondering what your company EIN is, you can find employer identification numbers on the back of every W-2 form.
There are some clear-cut requirements for getting an EIN, which make it easier to decide whether it’s the right time for your company to move into this operational phase. You’ll need an EIN:
- If your company has employees
- If your company operates as a C-corporation, S-corporation, LLC, or partnership
- If your company files employment taxes or excise taxes
- If your company withholds taxes on any income, besides wages, to someone who is not a U.S. resident
How to get an EIN
Applying for an EIN is pretty straightforward, especially for founders who have a U.S. Individual Tax Identification Number (ITIN), such as an SSN. International founders have slightly different steps, which are outlined below.
U.S. founders: Apply online
The online application is the simplest, fastest way to get an EIN. A U.S. office, agency, or legal residence is required to apply online; international founders cannot use the online application for an EIN.
The online EIN application must be completed in one sitting because progress on the website is not saved. Be sure to have your documentation on hand and set aside dedicated time to complete the application. It should only take a few minutes.
- Head to the IRS online EIN application. First, you’ll let the IRS know what your business structure is. The initial options are umbrella terms, such as corporations. The options will get more specific once you choose a general type.
⭑ Tip — Get ready: Be sure to have your SSN on hand before you begin so that none of your progress gets lost—the page times out frequently for security purposes.
- Next, you’ll select more specific details about your business structure, such as S-corporation or C-corporation. This tells the IRS which kind of tax filings to expect from your company.
⭑ Tip — Do your research: If you’re not sure or need to confirm what your business type is, take a look at your company formation documents.
- After that, you’ll select your reason for getting an EIN, such as to hire an employee or open a bank account.
⭑ Tip — Short and sweet: You’ll get an EIN immediately upon completing the form. Then, you can open an account with Mercury in just 10 minutes.
- Finally, you’ll enter your personal details as the responsible party, meaning that you’re the business owner or founder. This is where you’ll enter your SSN or other ITIN.
⭑ Tip — Not a founder: If you’re applying for an EIN on behalf of the responsible party, ensure you click the option to indicate that you’re a third party.
International founders: Apply by phone, mail, or fax
Founders located outside the U.S. will need to apply by mail or fax. U.S. founders can apply by mail or fax as well if they prefer these methods to the digital application.
- Complete an SS-4 form, which you can get instructions for here, and can complete here.
⭑ Tip — Type directly into the form to give the clearest information.
- Phone: Call 267-941-1099 between 6 AM and 11 PM Eastern Standard Time, Monday to Friday. You’ll answer questions from the IRS regarding the SS-4 and get your EIN while on the call.
⭑ Tip — This number is not toll-free and you may be on the phone for an hour or more. Consider using a web calling service to avoid international call fees.
- Fax: Fax your completed SS-4 to the appropriate number. You can expect to receive your EIN within four business days by fax.
⭑ Tip — You can fax 24/7, which makes this a useful option for founders whose time zone differences make calling difficult.
- Mail: Ship your completed SS-4 to the appropriate address. You can expect to receive your EIN within about four weeks by mail.
⭑ Tip — Make sure to send your completed form to the right address for your startup’s business structure, because there are multiple addresses for different types of IRS filings.
As long as you know your business structure and have all your documents in order, getting an EIN is a fairly simple process. Once you have your EIN in hand, you can focus on building your business.