EIN/Employer Identification Number

The term employer identification number (EIN) refers to a unique identifier that is assigned to a business entity so that it can easily be identified by the Internal Revenue Service (IRS). EINs are commonly used by employers for the purpose of reporting taxes. The number is made up of nine digits and is formatted as XX-XXXXXXX. Businesses can apply for EINs directly through the IRS, which usually issues them immediately.

KEY TAKEAWAYS

• An employer identification number is a unique nine-digit number that is assigned to a business entity.
• EINs allow the IRS to easily identify businesses for tax reporting purposes.
• All businesses that meet certain criteria must have an EIN before they can begin operating.
• Applying for one is free and applications are available on the IRS website.
• Along with tax reporting, EINs allow businesses to open bank accounts and apply for credit.

As noted above, EINs are unique nine-digit numbers that are formatted as XX-XXXXXXX. EINs are issued by the IRS and include information about the state in which the corporation is registered. The agency uses EINs to identify taxpayers that are required to file various business tax returns.

You need an EIN if you have employees, operate as a corporation or partnership, file certain tax returns, or withhold taxes from income other than wages.

Business entities must apply for an EIN by phone, online, fax, or mail before they can begin operations. All forms of businesses can apply for and be issued EINs, including:

• Limited Liability Companies (LLCs)
• Sole Proprietorship 
• Non-Profit Organizations (NPOs) 
• Government Agencies 
• S corporations
• Partnerships 
• Estates 
• Trusts

Note: The IRS is not biased toward the size of the company. This means even those with only one employee are just as eligible for an EIN as multinational corporations.

FUN FACT:

The EIN is not considered to be sensitive information the same way a Social Security number is and is freely distributed by businesses online and in print publications.