When Does a Business Need an EIN?
Your business must have an employer ID number (EIN) if:
You have employees You are operating your business as a corporation or partnership You have a limited liability company (LLC) taxed as a corporation or S corporation You file an employment tax return, excise tax return, or alcohol, tobacco, and firearms return You withhold taxes on income paid to a non-resident alien You have a Keogh plan
Types of organizations that must have an EIN include:
Trusts (except certain grantor-owned revocable trusts, IRAs, and Exempt Organization Business tax returns) Estates Real estate mortgage investment conduits Non-profit organizations Farmers’ cooperatives Plan administrators
When Might You Want an EIN?
Even if your business doesn’t need an EIN for federal tax reasons, you may still want to get one since it’s required in the following situations:
Opening a business bank accountApplying for business licensesFiling electronic tax returns and payments—most federal tax payments must be made electronically using the federal tax filing system (EFTPS), and an EIN serves as the identifier on all tax returnsFiling state taxes—you may also need a state EIN in some states
Does a Sole Proprietor Need an EIN Number?
If you are forming a sole proprietorship and you have no employees, you may not need an EIN. You will be filing your business income taxes with your personal tax return (Form 1040 and Schedule C), so you can use your Social Security number as your business taxpayer ID. Your sole proprietorship will need an EIN if:
You are subject to a bankruptcy proceedingYou change your business to a corporationYou take on partners and form a partnershipYou change your business to a multiple-member LLCYou change your LLC to be taxed as a corporation or S corporationYou buy or inherit an existing business that you operate as a sole proprietorship
Do I Need an EIN for a Qualified Joint Venture?
A qualified joint venture is a specific type of business co-owned and operated by two spouses. In general, spouses don’t need EIN numbers because they’re treated as sole proprietors for federal tax purposes. If you already have a spousal partnership with an EIN, retain the partnership EIN in case you lose your qualified joint venture status.
When To Apply (and Not Apply) For a New EIN
If you already have an EIN and your business changes, that doesn’t mean you automatically need a new one. The IRS says you should not apply for a new EIN if:
You change the name of your business Your partnership or corporation declares bankruptcy Your corporation elects to be taxed as an S corporation You elected on Form 8832 Entity Classification Election to change the way your business entity is taxed You change the location of your business or add locations—use Form 8822, Change of Address, instead
If you make typical changes to your business, like a change of business name or address, you don’t need a new EIN. But there are some other times when you will need to get a new one. If your business is a corporation, you will need a new EIN if your corporation receives a new charter from your state or if a new corporation is created after a merger. Also, a new EIN is necessary if you are a subsidiary of a corporation using the parent’s EIN or you become a subsidiary of a corporation. If your business is a partnership, you will need a new EIN if you end one partnership and create another new one or if your partnership is taken over by one of the partners and is operated as a sole proprietorship.
How To Apply for an EIN
You can apply for an EIN number with the Internal Revenue Service (IRS). The easiest and quickest way is to do it online. You can also apply by phone, fax, or mail. It is free to apply on the IRS website, so be aware of websites requiring a charge—it’s likely not a real EIN. After filling in the application online with your information—name, Social Security number, etc.—the information will be validated and you should get the EIN right away. To apply by fax or mail, you’ll need to fill out Form SS-4. You can find the fax and mailing address on the IRS website.
