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Definition of Employer Identification Number:

Employer Identification Number (EIN) is a unique identification number given to businesses, nonprofits and trusts. It is issued  by the IRS, for reporting taxes, obtaining licenses, and other validations. This number is for  lifetime, and is not re-issued even if the business is no longer running.

It is also known as the Federal Tax Identification Number and Tax Identification Number, since businesses/corporations use it for tax purposes. 

It consists of nine-digits in xx-xxxxxxx format. Similar to how individuals use their Social Security Number (SSN) for tax purposes, businesses enter their EIN number when asked for a Taxpayer Identification number. 
 

Do you need an Employer Identification Number?

  • Businesses operating as a corporation or partnership need an EIN. 
  • Single member Limited Liability Companies (LLC) or sole proprietorship with no employees, may use the owner’s SSN. That said, it will be required for opening a business checking account, to be associated with credit unions and brokerage houses or for acquiring business licenses. 
  • If the business files tax returns for employment, excise, alcohol, tobacco, or firearms, or has a Keogh plan, they would need EIN. 
  • Foreign companies that need to file tax returns in the US also need to have EIN as well. 
  • Self-employed individuals also need to have an EIN, which will be used by the primary contractor to report the business income paid to the individual. 

How to apply for Employer Identification Number?

It is fairly easy to apply for EIN. One can apply for it directly from the IRS website, or via phone or fax, all for free. You have to keep the following information ready while applying for it:

  • Legal name of the business
  • Name and ID number of the responsible party. 
  • Type of business
  • Purpose for applying. 
  • Start date/Acquisition date of the business. 
  • Highest number of employees expected in a year. 

If businesses change their business structure or ownership, for instance; from sole proprietorship to incorporation, they need to apply for a new number. This may not be required if you are simply changing the location or name of the business.