Getting an EIN: Who Needs One, How to Apply Free, and Common Pitfalls

An Employer Identification Number is a nine-digit federal tax ID that works like a Social Security number for your business. Getting one is quick and free, but the process has a few traps. Third-party websites charge fees for a service the IRS provides at no cost, and applicants make avoidable mistakes on the responsible party and entity type questions that are annoying to correct later.

Who needs an EIN

You generally need an EIN if any of the following apply:

You operate as a corporation or partnership, including a multi-member LLC.
You have employees or plan to hire.
You are required to file employment, excise, or alcohol, tobacco, and firearms tax returns.
You have a Keogh or another qualified retirement plan requiring the number.
You withhold taxes on income other than wages paid to a nonresident alien.
Your entity is a trust, estate, nonprofit, or other organization required to have one.

A single-member LLC without employees is not required to have an EIN for income tax, since it can use the owner's Social Security number, but many owners obtain one anyway. Banks typically ask for it, clients request a W-9 with an EIN to avoid handling your Social Security number, and it looks more professional. See single-member LLC taxes.

A sole proprietor with no employees also does not need an EIN, but may choose one for the same reasons.

How to apply

The IRS provides an online application through its website. Key points:

It is free. Any site that charges you a fee for "processing" is a third party. Some are legitimate service providers bundled with other services, but the IRS number itself costs nothing.
The online application is available during limited hours (weekdays, Eastern time), and issues the EIN immediately upon completion, in most cases.
One application per session, and per responsible party limits apply. The IRS limits how many EINs can be issued per responsible party per day, and generally limits the number one person can be associated with in some cases.
You can also apply by fax or mail using Form SS-4, which takes longer. International applicants who lack a U.S. taxpayer ID can apply by phone or fax under the instructions.

Information you will need

Prepare:

Legal name of the entity exactly as it appears on the formation documents.
Trade name if any (optional).
Entity type and tax classification. For an LLC, indicate the number of members and whether it is taxed as a disregarded entity, partnership, or corporation.
State and date of formation.
Reason for applying (started a new business, hired employees, banking purposes).
Principal business activity and the start date.
The responsible party: the individual who ultimately owns or controls the entity, with their Social Security number or ITIN. The IRS requires a real individual (not a nominee, and generally not another entity) for most entity types.
Mailing address and contact details.
Expected number of employees and first date wages will be paid, if applicable.

After you apply

The IRS provides a confirmation letter (CP 575) when you apply online or later by mail. Download and save it immediately. Banks, lenders, and payroll providers ask for it. If you lose it, the IRS can issue a verification letter (147C) on request.

Common mistakes

Choosing the wrong entity type. Selecting "corporation" for an LLC that has not elected corporate treatment, or "sole proprietor" for a multi-member LLC, creates a mismatch that generates notices. If you are unsure, read the instructions carefully or ask a professional.

Wrong responsible party. Listing an individual who is not the owner or controlling person, or using another entity where an individual is required.

Applying before the entity exists. Apply after formation. An EIN issued to a name that does not match the state's records can cause problems with banks and filings.

Duplicate applications. Applying twice for the same entity can result in two EINs, which is confusing. If you already have one, do not apply again.

Using the owner's EIN for a new entity. Each separate legal entity needs its own EIN. A sole proprietor forming an LLC that is a disregarded entity may need a new number if the LLC has employees.

Not matching the name across documents. The name on the EIN letter, articles of organization, bank account, and tax return should match.

When a new EIN is needed

Situations that generally require a new EIN:

A sole proprietorship incorporates or forms a partnership.
A partnership incorporates, or a new partnership is formed after the old one ends.
A corporation changes to another type via merger or in some reorganizations.
A new entity forms after a bankruptcy in some circumstances.

Situations that generally do not require a new EIN:

A name change of the same entity.
A change in location.
A change in the number of members that does not change the tax classification in a way requiring a new number (rules are technical: an LLC that goes from one member to two, for example, may be treated as a new partnership and require a new number, depending on how the change occurred).
An S-corp election for an existing entity.

Check the IRS guidance for your situation.

Privacy and security

An EIN is not as sensitive as a Social Security number but can still be misused. Provide it to clients, banks, payroll providers, and state agencies as needed, and be careful of unsolicited emails or calls requesting it or offering to "verify" your business. If you suspect misuse, contact the IRS.

What to do with the EIN once you have it

Open a business bank account. See business bank account setup.
Complete Form W-9 for clients who pay you.
Register for state taxes and employer accounts. See payroll for new employers.
Use it on tax returns and elections. See S-corp election guide.
Keep the confirmation letter with your formation records.

Foreign owners and ITINs

Foreign-owned entities can get an EIN. If the responsible party has no Social Security number, the IRS accepts other identification under its procedures. Tax reporting for foreign owners is a specialized area, so consult a professional.

If you need help

Most owners complete the application in minutes. If your situation includes multiple entities, an unusual ownership structure, or a conversion, AE Tax Advisors can help you sort out numbers, and you can begin with a discovery call.