Every corporation, partnership, and most LLCs must apply for and receive an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). An EIN is also referred to as a FEIN or Federal Employer Identification Number.
(Some state tax departments also issue tax identification numbers to their entities. However, this article is discussing the EIN issued by the IRS.)
An EIN identifies a business entity and is used for tax administration purposes. It must be included in a business’ federal tax returns. In addition, many banks, credit card companies, and vendors insist upon a business having an EIN, so this should be one of the first steps when forming your business.
This article discusses who needs an EIN, how to get one, and when a new EIN may be required.
What businesses need an EIN?
Your business needs an EIN if any of the following is true:
- it is operated as a corporation or partnership
- it has employees
- it files employment, excise, or Alcohol, Tobacco, and Firearms taxes
- it has a Keough plan
- it withholds taxes on income (other than wages) to a non-resident alien
- it's involved with trusts, estates, REMICs, non-profit organizations, farmers’ cooperatives, or plan administrators
A sole proprietorship, or a single member LLC that is taxed as a disregarded entity, does not need an EIN unless an EIN is required because of one of the qualifiers listed above (e.g., it has employees, files employment or excise taxes, etc.). If you aren’t required to obtain an EIN, you can use your Social Security number when filing income taxes instead of an EIN. However, a sole proprietorship or single-member LLC can obtain an EIN even if not required to.
Each partnership, LLC (other than one taxed as a disregarded entity), and corporation must have its own EIN.
If you operate more than one LLC or corporation, each business entity must have its own EIN.
How to apply for an EIN
You apply for an EIN with the IRS. Businesses located in the United States can apply for an EIN in one of three ways:
- by fax
- through the mail
Foreign businesses may not apply online. The IRS recommends that they apply over the phone, but they also provide the option to file via fax or through the mail.
All EIN applications (mail, fax, electronic) must disclose the name and Taxpayer Identification Number (Social Security Number or Individual Taxpayer Identification Number) of the true principal officer, general partner, grantor, owner, or trustor.
This individual, which the IRS calls the "responsible party", controls, manages, or directs the applicant’s business and the disposition of its funds and assets. Unless the applicant is a government entity, the responsible party must be an individual. If there is more than one responsible party, the applicant may list whichever party it wants the IRS to recognize as the responsible party.
Applying for an EIN online
Applying for an EIN online is the most efficient and quickest way to obtain an EIN for your business. Once the “interview style” application is submitted with all fields entered correctly, the EIN is issued on the spot.
Although your number may be immediately issued to you, you must wait up to two weeks before you can file an electronic return; make electronic deposits; or pass an IRS Taxpayer Identification Number (TIN) matching program. During this time, your business can use its EIN for other purposes, including setting up bank accounts and filing paper returns.
CT tip: When applying for an EIN online, be prepared. You must complete the application in one session. It will not save your information or let you return at a later time. Also, online sessions time out after 15 minutes of inactivity. It’s a good idea to complete the Form SS-4 (Application for Employer Identification Number) in advance so you are prepared to properly fill out all the fields.
The following criteria determine whether your business qualifies for online application:
- The principal business, office or agency, or legal residence (in the case of an individual), must be located in the United States or U.S. territories.
- The principal officer, general partner, grantor, owner, trustor, etc. must have a valid Taxpayer Identification Number (Social Security Number, or Individual Taxpayer Identification Number).
Applying by fax, mail or phone
Applying by fax: You can fax your completed Form SS-4 to the fax number listed on the IRS website. If you provide your own fax number, a fax will be sent back with the EIN generally within four business days.
Applying by mail: You can also mail your Form SS-4 to the address listed on the IRS website. Using mail to obtain your EIN is the slowest method of application. The processing time for an EIN application received by mail is approximately four weeks — provided everything on the form is properly completed.
Applying over the telephone: If you reside in the United States, you cannot apply for your EIN over the telephone. If you are not in the United States, you can apply by phone by calling 267-941-1099 between 6:00 a.m. to 11:00 p.m. (Eastern Time), Monday through Friday. Please note, this is not a toll-free number.
When do changes have to be reported to the IRS?
Businesses must report any changes to the responsible party to the IRS within 60 days by using Form 8822-B - Change of Address or Responsible party. That form is also used to report any changes in the business mailing address or business location.
When do I need a new EIN?
Generally, businesses need a new EIN when their ownership or structure has changed.
A sole proprietor is required to obtain a new EIN if the sole proprietor
- is subject to a bankruptcy proceeding;
- takes in partners and operates as a partnership; or
- purchases or inherits an existing business that will be operated as a sole proprietorship
A corporation is required to obtain a new EIN if
- it receives a new charter from the Secretary of State;
- it is a subsidiary of a corporation using the parent's EIN or become a subsidiary of a corporation;
- it changes to a partnership or a sole proprietorship; or
- a new corporation is created after a statutory merger
A partnership is required to obtain a new EIN if
- it incorporates;
- it’s taken over by one of the partners and is operated as a sole proprietorship; or
- the old partnership ends and a new one begins
In the case of an LLC, the IRS did not create a new tax classification for the LLC when it was created by the states. Instead the IRS uses the tax entity classifications it has always had for business taxpayers: corporation, partnership, or disregarded entity. The requirement to obtain a new EIN depends upon how the LLC is classified.