Your EIN, or employee identification number, allows the Internal Revenue Service to track payments your business makes to its employees. Think of it almost as a Social Security number for your enterprise. For the most part, corporations, LLCs and partnerships require an EIN. On the other hand, most sole proprietors can use their Social Security number in lieu of an EIN, unless they have employees or engage in certain financial options. Do you need an EIN for your enterprise? First, understand what type of business you have, and then use the guide below for more information.
Corporations and Partnerships
Are you in charge of a corporation? There are many different types of corporations and all C and S enterprises must apply for a number. As for partnerships, all of your general and limited partnerships require you to apply for an EIN.
As a sole proprietor, you don’t need an EIN if you fall into the following categories:
- You and your enterprise will not engage in a Keogh plan.
- You won’t run an enterprise eligible for federal excise tax collection.
- You have no intention of hiring employees.
Should you meet the above requirements, you can use your Social Security number. If you plan to open banking or lending accounts for your enterprise, you may need an EIN for ease of business. Conversely, if you plan to make any hires in the coming 12 months, you will need an EIN for your tax documents.
Limited Liability Corporations
Like sole proprietors, one-member LLCs may opt for using their Social Security number for IRS identification. To use this option, the operation must meet certain requirements. To qualify for this exemption, your enterprise cannot do the following:
- Hire employees
- Plan to hire employees in the future
- Have a Keogh plan
- Run a shipping (or similar) business that will owe federal taxes
Nonetheless, some banks or lending institutions might require an EIN for business transactions, and it can help you make a division between personal and business finances.
However, if you have multiple members, you are required to apply for and obtain an EIN for your enterprise regardless of your choice to take on employees. Additionally, if your single-member LLC expects to hire employees for the next year, you will need an EIN. In fact, you may need two: one for employment taxes reported under the enterprise and another for money paid to LLC members.
Applying for Your EIN
There are three ways to apply for an EIN:
- Online: Go to the IRS website. You will be asked a series of questions and required to input the Social Security number of one business owner. If the site validates this information, your number will be issued immediately.
- Phone: Call 800.829.4933 for the IRS’s Business and Specialty Tax Line. You will be asked several questions and be issued an EIN once the information is verified.
- Mail: Complete Form SS-4, which can be found on the IRS website for download or mail delivery. Send it to the IRS and you should receive your number in no more than four weeks.
If you run an enterprise, you’ll have to file taxes, and you don’t want to be in a time crunch and suddenly realize you need an EIN. As you’re gathering your tax documents, consult with this guide to figure out whether or not your business is required to use an employee identification number. Especially if you run an LLC or sole proprietorship, the rules can get a little tricky. However, if you have employees or benefits for your members, there’s a good chance you’ll need to apply for a number through the IRS. If you’re unsure, you can always check out the IRS website for more information regarding your business type or even give a tax professional a quick phone call.
The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.