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What is an Employer Identification Number (EIN)?

IRS: Employer Identification Number (EIN)Disclaimer: This website is not affiliated with or endorsed by the IRS. All content of this site is for informational purposes only and is not to be used as legal or financial advice. If you need official or professional advice, please visit the IRS website at http://www.irs.gov or consult a certified tax professional. The information on this page is from IRS Publication 1635 (Rev. 10-2008) and is relevant to the 2009 tax year.

An Employer Identification Number (EIN), also known as a Federal Tax Identification Number is a nine-digit number that the IRS assigns in the following format: XX-XXXXXXX. It is used to identify the tax accounts of business entities or employers and certain others who have no employees. However, for employee plans, a letter (for example, P) or the plan number (e.g., 003) may follow the EIN.

The IRS uses the number to identify taxpayers that are required to file various business tax returns. EINs are used by employers, sole proprietors, corporations, partnerships, non-profit associations, trusts, estates of decedents, government agencies, certain individuals, and other business entities. Use your EIN on all of the items that you send to the IRS and the Social Security Administration (SSA). You should have only one EIN for the same business entity.

An EIN is for use in connection with your business activities only. Do not use your EIN in place of your social security number (SSN).

Do I Need An Employer Identification Number?

There are different criteria for different business classifications. In general, you will need an EIN if you answer "Yes" to any of the following questions. However, you should always look at the specific information pertaining to your business type.

  • Do you have employees?
  • Do you operate your business as a corporation or a partnership?
  • Do you file any of these tax returns: Employment, Excise, or Alcohol, Tobacco and Firearms?
  • Do you withhold taxes on income, other than wages, paid to a non-resident alien?
  • Do you have a Keogh plan?
  • Are you involved with any of the following types of organizations?
    • Trusts, except certain grantor-owned revocable trusts, IRAs, Exempt Organization Business Income Tax Returns
    • Estates
    • Real estate mortgage investment conduits
    • Non-profit organizations
    • Farmers' cooperatives
    • Plan administrators

Employer Identification Number (EIN) Information By Business Entity Type

Sole Proprietorship

Definition: A sole proprietorship is an unincorporated business that is owned by one individual. It is the simplest form of business organization to start and maintain. The business has no existence apart from you, the owner. Its liabilities are your personal liabilities and you undertake the risks of the business for all assets owned, whether or not used in the business. Include the income and expenses of the business on your own tax return. For more information on sole proprietorships, see Publication 334, Tax Guide for Small Businesses. If you are a farmer, see Publication 225, Farmer’s Tax Guide.

You will need a new EIN if any of the following are true:

  • You file bankruptcy under Chapter 7 (liquidation) or Chapter 11 (reorganization) of the Bankruptcy Code
  • You incorporate
  • You are a sole proprietor and take in partners and operate as a partnership
  • You are establishing a pension, profit sharing, or retirement plan

You do not need a new EIN if any of the following are true:

  • You change the name of your business
  • You change your location or add locations (stores, plants, enterprises or branches of the entity)
  • You operate multiple businesses (including stores, plants, enterprises or branches of the entity)

    Note: If you are a sole proprietor who conducts business as a limited liability company (LLC), you do not need a separate EIN for the LLC, unless you are required to file employment or excise tax returns. A limited liability company is an entity formed under state law by filing articles of organization as an LLC. An LLC owned by one individual is automatically treated as a sole proprietorship for federal income tax purposes (referred to as an entity to be disregarded as separate from its owner). Report the business activities of the LLC on your Form 1040 using a Schedule C, Schedule C-EZ or Schedule F.

Partnership

Definition: A partnership is the relationship existing between two or more persons who join together to carry on a trade or business. Each partner contributes money, property, labor or skill, and expects to share in the profits and losses of the business.

The term ‘partnership’ includes a limited partnership, syndicate, group, pool, joint venture, or other unincorporated organization, through or by which any business, financial operation, or venture is carried on.

An unincorporated organization with two or more members is generally classified as a partnership for federal tax purposes if its members carry on a trade, business, financial operation, or venture and divide its profits. However, a joint undertaking merely to share expenses is not a partnership. For example, co-ownership of property maintained and rented or leased is not a partnership unless the co-owners provide services to the tenants.

You will need a new EIN if any of the following are true:

  • You incorporate
  • One partner takes over and operates as a sole proprietorship
  • The partnership is terminated (no part of any business, financial operation, or venture of the partnership continues to be carried on by any of its partners in a partnership) and a new partnership is begun

You do not need a new EIN if any of the following are true:

  • The partnership declares bankruptcy. However, if a liquidating trust is established for a partnership that is in bankruptcy, an EIN for that trust is required. See Treasury Reg. § 301.7701-4(d).
  • The partnership name changes
  • The location of the partnership changes or new locations are added
  • The partnership terminates under IRC Section 708(b)(1)(B). A partnership shall be considered terminated if within a 12-month period there is a sale or exchange of at least 50% of the total interest in partnership capital and profits to another partner. If the purchaser and remaining partners immediately contribute the properties to a new partnership, they can retain the old partnership EIN.

Limited Liability Company (LLC)

Definition: A limited liability company (LLC) is an entity formed under state or foreign law by filing articles of organization as an LLC. Unlike a partnership, none of the members of an LLC are personally liable for its debts.

LLC Tax Classification: Treas. Reg. Section 301.7701-3 provides guidance on classification for limited liability companies. Generally, if the business is an unincorporated business entity, and there are two or more owners, the entity can choose to be a partnership or a corporation. If an unincorporated business entity has only one owner, it can either elect to be a corporation or the entity can be disregarded. If an individual owns a disregarded entity, it is treated as a sole proprietorship. If a corporation owns a disregarded entity, it is treated as a division or branch of the corporation. See Form 8832, Entity Classification Election, for more details.

Note: While a single member entity, that does not elect corporate status, will default to a disregarded status for some federal tax purposes, it will not be disregarded for all federal tax purposes. For federal employment taxes (after January 1, 2009) and certain excise taxes (after January 1, 2008) it will be treated as a separate entity.

Single Member LLC:
A single member LLC generally has the following choices:

Multiple Member LLC:
A multiple member LLC generally has the following choices:

  • File Form 8832 to be taxed as a corporation
  • If qualified, file Form 2553, to be taxed as an S corporation
  • Be taxed (by default) as a partnership

    Note: A husband and wife, who are owners of an LLC, and share in the profits of such, can file as a single member if they reside in a Community Property State (Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas, Washington, or Wisconsin). Publication 555, Community Property, contains additional information on Community Property laws.

If you are organized as a limited liability company and require an EIN, please refer to the instructions for Form SS-4 for information on completing the form or apply online using the Internet EIN application available at http://www.irs.gov and select “Limited Liability Company” as the type of entity you are establishing.

Corporation

Definition: A corporation is defined as a legal entity or structure created under the authority of the laws of a state consisting of a person, or group of persons, who become shareholders. The entity’s existence is considered separate and distinct from that of its members. Since a corporation is an entity in its own right, it is liable for its own debts and obligations. In forming a corporation, prospective shareholders transfer money, property, or both, for the corporation’s capital stock.

The following businesses formed after 1996 are taxed as corporations:

  • A business formed under a federal or state law that refers to it as a corporation, body corporate, or body politic
  • A business formed under a state law that refers to it as a joint-stock company or joint-stock association
  • An insurance company
  • You create a new corporation after a statutory merger
  • You receive a new corporate charter

You will not need a new EIN if any of the following are true:

  • You are a division of a corporation
  • After a corporate merger, the surviving corporation uses its existing EIN
  • A corporation declares bankruptcy. However, if a liquidating trust is established for a corporation that is in bankruptcy, an EIN for that trust is required. See Treasury Reg. § 301.7701-4(d).
  • Your business name changes
  • You change your location or add locations (stores, plants, enterprises or branches)
  • You elect to be taxed as an S Corporation by filing Form 2553
  • After a corporate reorganization, you only change identity, form, or place of organization
  • The corporation is sold and the assets, liabilities and charters are obtained by the buyer

How to Apply for an Employer Identification Number (EIN)

You can apply for an EIN online, by telephone, fax, or mail depending on how soon you need to use the EIN.

Apply Online

Note: This is a free service offered by the Internal Revenue Service at http://www.irs.gov.
Beware of websites on the Internet that charge for this free service!

The Internet is the preferred method to use when applying for an EIN. Visit the IRS website at http://www.irs.gov (keyword “EIN”) and check out the Interview-style online EIN application. The application includes embedded help topics and hyperlinked keywords and definitions so separate instructions aren’t needed. The information you submit is validated during the online session. Once you’ve completed the application, you will receive your EIN immediately. You can then download, save, and print your confirmation notice. (This feature is not available to Third Party Designees.) The online application is fast, free, and user-friendly!

The application is available during the following hours:
Monday – Friday 6:00 a.m. to 12:30 a.m. Eastern time
Saturday 6:00 a.m. to 9:00 p.m. Eastern time
Sunday 7:00 p.m. to 12:00 a.m. Eastern time

The online application is available for all entities whose principal business, office or agency, or legal residence (in the case of an individual), is located in the United States or U.S. Territories. Additionally, the principal officer, general partner, grantor, owner, trustor etc. must have a valid Taxpayer Identification Number (Social Security Number, Employer Identification Number, or Individual Taxpayer Identification Number) in order to use the online application.

Remember, the contents of this page are for informational purposes only. Before doing anything regarding your personal or business taxes, always familiarize yourself with the published rules on the IRS website and/or consult with a business, financial or tax professional! We accept no liability for any decisions you make, or their consequences, using information from this website.

 

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