An Employer Identification Number (EIN)—also known as a Federal Tax Identification Number—is a nine-digit number the IRS assigns to identify tax accounts. While not every business is required to have one, there are several situations in which obtaining an EIN is necessary.
When is an EIN required?
You’ll need an EIN if you answer “yes” to any of the following:
- Will you have employees?
- Will you operate your business as a corporation or partnership?
- Will you file employment, excise, or alcohol, tobacco and firearms tax returns?
- Will you withhold taxes on income (other than wages) paid to a non-resident alien?
- Will you have a retirement plan?
- Will you be involved with any of the following?
- Trusts (except certain grantor-owned revocable trusts, IRAs, and exempt organization business income returns)
- Estates
- Real estate mortgage investment conduits
- Nonprofit organizations
- Farmers’ cooperatives
- Plan administrators
If any of the above apply to your situation, you are required to obtain an EIN.
When will you need a new EIN?
You may need a new EIN if your business’s structure or ownership changes. For example:
- A sole proprietor who incorporates or forms a partnership will need a new EIN.
- A sole proprietor converting to an LLC will only need a new EIN if electing to be taxed as a corporation or partnership.
However, you do not need a new EIN if you’re only changing your business name or location, or operating in multiple locations under the same structure.
How do you apply?
Applying for an EIN is free through the IRS and can be done online at irs.gov, or by fax, mail, or phone.
All applications must include the name of the “responsible party,” defined as the individual who controls or manages the entity and its assets. This must be a person—not a business entity—unless the applicant is a government agency.
Thinking of starting a new venture or updating your business structure?
Let’s make sure your EIN application and tax setup are done right.