What is Employer Identification Number (EIN)?

Employer Identification Number (EIN) is a 9-digit unique number provided by the IRS (Internal Revenue Service) to businesses and other entities for taxation purposes. It is also known as a Federal Tax Identification Number (FTIN) or an Employer Identification Number (EIN). Just as a Social Security Number (SSN) is the equivalent of an individual’s tax identification number, an EIN is the business entity’s tax identification number.

Businesses use their Employer Identification Number for diverse activities that include filing taxes, opening a business bank account, hiring employees, and applying for business licenses and permits. It plays an important role in running a business and complying with tax laws in the United States.

How to Get an Employer Identification Number?

1. Determine Eligibility: Ensure that your business is eligible for an EIN. Most types of businesses, including sole proprietorships, partnerships, corporations, and LLCs, are required to have an EIN if they have employees, operate as a corporation or partnership, or file certain types of tax returns.
2. Choose the Right Entity Type: Determine the legal structure of your business. Different entity types have different requirements for obtaining an EIN.
3. Prepare Information: Gather the necessary information required to apply for an EIN. This typically includes details such as the legal name of the business, the address, the type of entity, and the reason for applying.
4. Apply Online, by Mail, Fax, or Phone: There are several ways to apply for an EIN:
   • Online: The quickest and most convenient method is to apply online through the IRS website. This service is available for businesses with a principal address in the United States or its territories.
   • By Mail or Fax: You can fill out Form SS-4 , Application for Employer Identification Number, and mail or fax it to the IRS. The processing time for this method is longer compared to applying online.
   • By Phone: You can apply by phone if you are an international applicant or if you do not have access to the internet. Call the IRS at 267-941-1099 (not a toll-free number) 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.
5. Provide Required Information: Regardless of the method you choose, you will need to provide information about your business, such as its legal name, address, type of entity, the reason for applying, and details about the responsible party.
6. Receive EIN: Once your application is processed and approved, you will receive your EIN from the IRS. This number is typically issued immediately if you apply online. If you apply by mail, fax, or phone, it may take several weeks to receive your EIN.
7. Keep Your EIN Secure: Once you receive your Employer Identification Number, keep it in a safe place. You will need it for various business purposes, including filing taxes, opening a bank account, and hiring employees .

Benefits of an Employer Identification Number

1. Legal Requirement: For a lot of companies, it is a legal requirement to have an EIN number. It is compulsory for businesses that hire employees, have a partnership or corporation, or submit certain types of tax returns.
2. Tax Purposes: The EIN plays a key role in filing different types of business tax returns, like income tax, employment tax and excise tax. It assists the IRS in tracking your business and identifying it for tax purposes, enforcing tax compliance.
3. Hiring Employees: If you intend to hire employees, you’ll need an Employer Identification Number to file employment taxes, and to set up retirement plans and other employee benefits .
4. Opening Bank Accounts: Banks usually require businesses to have an EIN before opening a business bank account , which helps keep financial records clear and separate. Having a dedicated account for business finances ensures better organization and prevents confusion between personal and business funds.
5. Building Business Credit: Having an Employer Identification Number for your business gives you a chance to form a distinct entity from your personal credit. This is very relevant for loans, lines of credit , and other types of financial support.
6. Legal Protection: An EIN as opposed to your personal SSN for any business transaction purposes provides you with better privacy and lowers the chance of identity theft.
7. Professional Image: Having an Employer Identification Number makes you appear as a professional business in the eyes of the public. It gives a clear signal that you are serious about this business.
8. Facilitates Partnerships: It facilitates the process of having business relationships with other entities or partners as it simplifies the process of establishing formal business relationships and transactions.
9. Government Compliance: An EIN will be required in order to obtain business licenses and permits, apply for business loans, or bid on government contracts.
10. IRS Correspondence: The most crucial part is having an EIN which will allow the IRS to direct all the business correspondence to the right person to manage.

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Jahnavi Pulluri

Content Writer

A writer by profession and a music lover at heart, Jahnavi crafts simple, engaging content around employee management and workplace culture. She enjoys turning complex topics into clear and creative stories that connect with readers. When the words go quiet, she's either strumming her guitar, lost in music, or giving in to her soft spot for cake and ice cream.