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

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You may also run across references to a tax ID number, a federal tax ID number, an FEIN, an IRS EIN, a tax identification number, a federal identification number, a business tax ID number, or a federal EIN. In most cases, these terms refer to the EIN assigned by the IRS, although sometimes a tax ID number, a tax identification number, or a business tax ID number may also refer to a state-issued tax number.

Do I Need an EIN?

You will need an EIN if any of the following apply to you:

  • You have at least one employee
  • You operate as a corporation
  • You operate as a partnership
  • You must file a federal Employment tax return, Excise tax return, or Alcohol, Tobacco, and Firearms tax return
  • You have a Keogh plan
  • You are involved with any of the following entities: trusts, estates, real estate mortgage investment conduits, nonprofit organizations, farmers’ cooperatives, or plan administrators

Corporations or Partnerships

As noted above, if your business is a corporation or a partnership, you will need to apply for an EIN. You will need the EIN even if your corporation or partnership doesn’t have any employees.

Limited Liability Companies (LLCs)

If your business is an LLC, you will need an EIN if your business is:

  • A multi-member LLC

  • A single-member LLC with employees (or you plan to hire employees at any time over the next 12 months)

  • A single-member LLC that has elected to be taxed as a corporation

If your business is a single-member LLC with no employees (and with no plans to hire any employees over the next 12 months), you do not have a Keogh plan, and you are not required to file any of the federal tax returns mentioned in the Do I Need an EIN? list above, you will not need to apply for an EIN. Instead, you can use your Social Security number when filing your business’s federal tax returns.

Sole Proprietorships

If you are a sole proprietor, you will only need to apply for an EIN:

  • If you have employees (or plan on hiring employees over the next 12 months)
  • You have a Keogh plan
  • You are required to file a federal Employment tax return, Excise tax return, or Alcohol, Tobacco, and Firearms tax return

Otherwise, you can continue using your Social Security number with the IRS.

Other Reasons to Apply for an EIN

Even though you may not be required by the IRS to apply for an EIN, there are still a few reasons why you may decide to get one anyway.

  • An EIN gives you more privacy, as you can use your EIN instead of your Social Security number on documents. When might this be helpful? If you’re a freelancer or an independent contractor, you probably find yourself providing your Social Security number to clients on a fairly regular basis. You may want to use an EIN instead.
  • Depending on your bank, you may need an EIN to open a bank account for your business.
  • You may also find you need an EIN to apply for certain business permits.
  • Using an EIN instead of your Social Security number can help deter identity theft. While having an EIN doesn’t mean you won’t be the target of identity theft, it can provide an extra layer of protection, as you will be providing your Social Security number less frequently.
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