For those in the United States or U.S. territories, an EIN (Employer Identification Number) is an identification number you get from the IRS used to identify a business entity.
This number used to be primarily for those businesses that had or intended to hire employees (which is why it was called the Employer Identification Number).
The IRS relaxed that standard in recent years, and it’s used these days as an all-purpose Federal Tax Identification Number.
This is particularly helpful for sole proprietors because they can obtain and use an EIN now instead of their Social Security number on forms they give to clients and others.
You need an EIN if you:
- Started a new business or purchased a going one;
- Hired or will hire employees, including household employees;
- Opened a bank account that requires an EIN for banking purposes;
- Are a foreign person and need an EIN to comply with IRS withholding regulations;
- Formed a partnership or corporation; or
- Had a change in ownership or structure/formation of a business (such as changing a sole proprietorship to a corporation or partnership).
There is no fee required, you do not need to have employees, and you can obtain an EIN instantly right online.
In navigating these matters, always talk with your accountant and visit the IRS website for the most accurate, up-to-date information and advice.