When you start a business, you may need an employer identification number (EIN) to identify the company for tax and financial purposes. Also known as a federal taxpayer identification number, your EIN is a unique nine-digit number that functions for your business in a way similar to a Social Security number (SSN).
Once you have an EIN, it’s permanently linked to your business entity. It can’t be reassigned or canceled, but the account can be closed if you decide to close your business. An EIN number can also be reactivated by the “responsible party,” a person designated on the original application as being responsible for the company.
Not every business needs an EIN, but the IRS does require one in most cases. Having one can also be helpful when seeking financing from traditional or alternative lenders. Here’s what you should know about determining EIN requirements and how an official tax ID can benefit your company.
According to the IRS, your business must have an EIN if:
In these cases, you need an EIN to file business tax returns and pay your employees. You might also be required to supply your business tax ID when you:
Most sole proprietorships and limited-liability companies (LLCs) without employees aren’t required to have an EIN number, but it may be a good idea to get one anyway.
Without an EIN, you need to use your SSN for business transactions, which can put your identity at risk. This may be a particular concern for independent contractors with large client bases. As a contractor, you have to put your SSN on every W-9 you file, and your clients use it when issuing your 1099-MISC forms at tax time.
Using an EIN doesn’t safeguard completely against identity theft, but it does help protect your personal information and assets by minimizing the frequency with which your SSN is recorded.
Using an EIN also makes your company look more legitimate to banks, lenders, vendors and clients. It indicates you take your business seriously and are committed to your work. The number differentiates a business venture from a side hustle or hobby, and shows you intend to stick with it for the foreseeable future.
If your business changes ownership or structure at any time, you may need to apply for a new EIN. Examples of such changes include:
You can get your EIN online for free by completing the employer identification number application on the IRS website. This “interview-style” application walks you through a series of questions with links to pertinent instructions and helpful information. You’re eligible to apply online if:
The IRS officially defines a responsible party as the “individual or entity” who “controls, manages, or directs the applicant entity and the disposition of its funds and assets.” Only one responsible party per day may apply for an EIN.
For security reasons, you can’t use any automated tools to complete your EIN application, and the system will log you out after 15 minutes of inactivity. Be sure to set aside a window of time during which you won’t be interrupted so that you don’t have to start the process all over again!
The IRS will issue your EIN as soon as the application is completed. You can download and print the paperwork immediately. However, it may take up to two weeks for your EIN to become part of official IRS records.
After the IRS issues your EIN, you should keep the paperwork they give you so that you always have quick access to the number. But running a business can be crazy and unpredictable, and your EIN is just one more thing to try to remember in the middle of the daily rush.
Don’t panic if you find yourself sitting down to fill out business documents or tax returns and forget your tax ID number. Even if you lose the file with the original IRS documents, there are several ways to locate your EIN.
First, look at other business paperwork. Your EIN should be on your tax returns from previous years or any business loan applications you’ve filed. Business licenses and permits also have your EIN, as do bank account statements and credit reports.
If your files are really a mess, you can call the bank where you have your business account or get in touch with your accountant to get your EIN. Calling the IRS is also an option; the IRS Business & Specialty Tax Line is available from 7 a.m. to 7 p.m. Eastern time, Monday through Friday. However, be prepared to wait for quite a while to talk to someone if you choose this option.
You can check online databases or use a paid service like EIN Finder to locate your number as a last resort. But before turning to these paid options, it’s better to try these free (and safe) methods first!
One of the perks of setting your business apart as its own entity with an EIN is the opportunity to easily access the funding you need to invest in growth. National Business Capital & Services offers a wide variety of business loans with flexible terms to meet your needs.
Whether you want to take on more employees, upgrade your equipment or expand into a second location, a business finance advisor at National can point you to the perfect financing option.
National Business Capital & Services is the #1 FinTech marketplace offering small business loans and services. Harnessing the power of smart technology and even smarter people, we’ve streamlined the approval process to secure over $1 billion in financing for small business owners to date.
Our expert Business Financing Advisors work within our 75+ Lender Marketplace in real time to give you easy access to the best low-interest SBA loans, short and long-term loans and business lines of credit, as well as a full suite of revenue-driving business services.
We strengthen local communities one small business loan at a time. For every deal we fund, we donate 10 meals to Feeding America!
Megan is passionate about helping business owners along their journey - providing them with relevant content they can use in their day-to-day operations.