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What is an EIN, and does my company need one?

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An EIN, or Employer Identification Number, is the nine-digit number the IRS assigns to a business so it can be identified on tax filings. Despite the name, it has nothing to do with whether you employ anyone. Every corporation needs one, whoever owns it, and so does any LLC or partnership with more than one owner. So does any business that hires staff or pays certain federal taxes, whatever its form. The only business that can run on the owner's Social Security number instead is a one-person business with no employees, and the next paragraph is about why almost nobody does.

A sole proprietor, or a single-member LLC taxed as one, with no employees can use the owner's Social Security number. Almost nobody does, for a reason the IRS rules do not mention: banks. Nearly every bank asks an LLC or corporation for an EIN before it will open a business account, and a business without its own account is one where the owner's personal money and the company's money are mixed, which is the thing an LLC was supposed to prevent.

Where you will be asked for it

Opening the bank account is the first time. After that it goes on every federal tax return, every payroll filing, the W-9 you hand to a client before they pay an invoice, state tax registrations, and most applications for business credit. Using an EIN in those places also means you are not handing your Social Security number to every customer who asks for a W-9.

What it is not

It is not a state registration. Forming an LLC or corporation with the state does not create an EIN, and getting an EIN does not form anything. It is not a license to do business, and it is not a state tax ID, which some states issue separately for sales tax or payroll. The IRS issues it, and it never expires.

Arabella files the EIN application for members and for anyone who forms a company through us. The IRS never charges for an EIN, and neither do we.

Written by the lawyers who built Arabella. This is legal information, not legal advice for your situation, and reading it does not make us your lawyers. For a real dispute or a high-stakes decision, talk to a licensed attorney. More questions.