Your Employer Identification Number (EIN) serves the same function for your business as does your Social Security number for your person. It is first and foremost the identification number that you use to file your taxes. It is how the government identifies your business as a separate legal entity.
But the EIN, like your Social Security number, has come to be used for much more than just your taxes.
You will need an EIN to open a bank account, apply for credit, set up business accounts with some vendors and complete licensing with the government of your state.
Apart from it being needed for these functions, there are many situations where you are legally required to obtain an EIN. You will need one, for example, when you hire employees, withhold taxes, form a corporation and in most cases when you form an LLC. You will need the EIN if you purchase an on-going business, if you change your business type and if you create a trust or a pension plan.
You do not, under the law, need an EIN if you are a sole proprietorship with no employees. You also do not need an EIN if you are a single member LLC with no employees. In both of these cases you can use your Social Security number. Most small business advisors suggest that in these cases, you get an EIN anyway. It is better to keep your personal finances separate from your business affairs.
To apply for your EIN you will need the following:
- Business name
- Both the physical and mailing addresses of your business
- Type of business (LLC or corporation)
- State in which your corporate documents are filed
- Start date of your business
- The Social Security number of the person responsible for the business (or the EIN from another business).
The online application should take no more than 15 minutes to complete. You should receive your EIN immediately.
While the number is issued at once, it takes two weeks for it to get into use by the IRS. You will not be able to use automated feature, like online filing, until that time.