Which Type of Business Entity Needs an Employer Identification Number (EIN)?

Find out if your business needs an EIN and how to get one.

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The purpose of an employer identification number (EIN) -- also known as a taxpayer identification number, or TIN -- is to allow the IRS to track wages and other payments from your business to the business's employees and owners. An EIN is also helpful in establishing a business bank account that's separate from your personal bank account. Whether you're required to get an EIN for your business depends on how your business is set up. Read on to find out if you need an EIN, and if so, how to get one.

Corporations

All C corporations and S corporations need an EIN. (Learn more about different corporate forms in Nolo's Corporations section.)

Partnerships

All general partnerships and limited partnerships need an EIN. (More information in Nolo's Partnerships section.)

LLCs

While some one-member LLCs can get by with using their own Social Security number for IRS purposes, if your LLC will hire employees -- or if it will have multiple members -- you need to apply for an EIN for the LLC. Below are the details. (Get more information on running an LLC in Nolo's LLCs section.)

Multiple-Member LLCs. If you are forming an LLC with multiple members, your LLC will need to obtain an EIN from the IRS, whether or not you have (or will eventually hire) employees.

Single-Member LLCs With No Employees. If you are forming a one-member LLC and you do not plan on hiring employees (and you will not have a Keogh plan or run a trucking, transport, or similar company that will owe federal excise taxes), you do not need to apply for an EIN for your business. You may use your own Social Security number for federal tax purposes (don't worry, you won't need to use your Social Security number on any public documents). However, know that some lenders and banks that you do business with may require you to have an EIN. You can always get an EIN for your LLC if you wish, either to make doing business with banks easier or just to separate your personal finances from your business's finances as much as possible.

If you are converting a sole proprietorship to an LLC and you already had an EIN for your sole proprietorship, you can use that one for your LLC, for as long as your LLC does not have employees. 

Single-Member LLCs With Employees. If your one-member LLC plans on hiring employees in the next 12 months, your LLC will need to apply for an EIN. In this case, the IRS may actually assign you two EINs: one for the LLC and one for you, the sole owner. Employment taxes must be reported under the LLC's EIN, and any monies paid from the LLC to the LLC member must be reported under the member's EIN number.

Note that if you are converting your sole proprietorship to an LLC and you have hired (or plan on hiring) employees, but you already have an EIN, you may need to apply for another EIN. Any monies paid from the LLC to you as sole owner must be reported under your EIN as owner, while employment taxes must be reported under the LLC's EIN.

If Your LLC Elects to Be Taxed as a Corporation. If your LLC elects corporate-style taxation, it will need to apply for an EIN.

Sole Proprietorships

If Your Sole Proprietorship Won't Have Employees. If you don't plan on hiring employees (and you won't have a Keogh plan or run a company that will owe federal excise taxes), you don't need to apply for an EIN. You can use your own Social Security number for federal tax purposes (you won't need to use your Social Security number on any public documents). But keep in mind that some lenders you do business with may require you to get an EIN for your business.

If Your Sole Proprietorship Will Have Employees. If your business plans on hiring employees in the next 12 months, you will need to apply for an EIN. (Learn more in Nolo's section on Sole Proprietorships.)

How to Apply for an EIN

Apply Online. You can apply for an EIN on the IRS website at www.irs.gov/businesses/small/article/0,,id=102767,00.html. You will need to answer several questions and enter your Social Security number (or that of one of your business's owners). If the IRS is able to validate the information you enter, an EIN is issued to you immediately.

Apply by Phone. You can obtain an EIN by calling the IRS's Business and Specialty Tax Line at (800) 829-4933. After answering several questions over the phone, you will receive your EIN.

Apply by Mail. You can complete IRS Form SS-4 (available on the IRS website at www.irs.gov/pub/irs-pdf/fss4.pdf) and submit it by mail. The IRS will send you your EIN within four weeks.

by: , J.D.

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