Which Type of Business Entity Needs an Employer Identification Number (EIN)? (2024)

EINs are unique nine-digit numbers assigned by the IRS to a business. The business uses its EIN on tax returns, bank accounts, and other government filings.

The purpose of an employer identification number (EIN)—also known as a "taxpayer identification number" or "TIN"—is to allow the IRS to track wages and other payments from your business to the business's employees and owners. An EIN is also helpful in establishing a business bank account that's separate from your personal bank account.

Who Needs an EIN?

Whether you're required to get an EIN for your business depends on how your business is set up. Many businesses must have an EIN. But some businesses—specifically, some single-owner companies—might not be required to get an EIN.

When you don't have an EIN for your company, you instead use your Social Security number (SSN) on your business accounts and government filings.

Corporations Must Have an EIN

All C corporations and S Corporations need an EIN.

Partnerships Must Have an EIN

All general partnerships and limited partnerships need an EIN.

Some LLCs Must Have an EIN

If you have a limited liability company (LLC), then multiple factors will determine whether you need to get an EIN. Many single-member LLCs can simply use their owner's SSN for IRS purposes. But if your LLC will hire employees—or if it'll have multiple members—you need to apply for an EIN for the LLC. Below are the details.

Multiple-member LLCs. If you're forming an LLC with multiple members, your LLC will need to obtain an EIN from the IRS, whether or not you have (or will eventually hire) employees.

Single-member LLCs with no employees. If you're forming a single-member LLC and you don't plan on hiring employees (and you won't have a Keogh plan or run a trucking, transport, or similar company that will owe federal excise taxes), you don't need to apply for an EIN for your business. You can use your own SSN for federal tax purposes (don't worry, you won't need to use your SSN on any public documents). However, know that some lenders and banks that you do business with might require you to have an EIN. You can always get an EIN for your LLC if you wish, either to make doing business with banks easier or just to separate your personal finances from your business's finances as much as possible.

If you're converting a sole proprietorship to an LLC and you already had an EIN for your sole proprietorship, you can use that one for your LLC, as long as your LLC doesn't have employees.

Single-member LLCs with employees. If your one-member LLC plans on hiring employees in the next 12 months, your LLC will need to apply for an EIN. In this case, the IRS might actually assign you two EINs: one for the LLC and one for you, the sole owner. Employment taxes must be reported under the LLC's EIN, and any monies paid from the LLC to the LLC member must be reported under the member's EIN number.

Note that if you're converting your sole proprietorship to an LLC and you've hired (or plan on hiring) employees, but you already have an EIN, you might need to apply for another EIN. Any monies paid from the LLC to you as sole owner must be reported under your EIN as owner. Employment taxes must be reported under the LLC's EIN.

For more guidance, check out our article about when a single-member LLC needs an EIN.

If your LLC elects to be taxed as a corporation. If your LLC elects corporate-style taxation, it'll need to apply for an EIN.

Most Sole Proprietorships Don't Need an EIN

As a sole proprietor, your EIN requirement will depend on whether you have employees.

If your sole proprietorship won't have employees. If you don't plan on hiring employees (and you won't have a Keogh plan or run a company that will owe federal excise taxes), you don't need to apply for an EIN. You can use your own SSN for federal tax purposes. (You won't need to use your SSN on any public documents.) But keep in mind that some lenders you do business with could require you to get an EIN for your business.

If your sole proprietorship will have employees. If your business plans on hiring employees in the next 12 months, you'll need to apply for an EIN.

What Are the Benefits of Getting an EIN?

You can apply for an EIN for any business—regardless of whether it's required. If you plan to have an EIN in the future (perhaps you're considering hiring an employee, but not quite yet), it's a good idea to submit your application now to avoid the hassle of changing account numbers later. An EIN allows you to keep your personal information safe. Without an EIN, you'll use your SSN on your business filings and accounts.

An EIN might benefit your business financially. When reviewing loan applications, some lenders prefer to see an EIN rather than a SSN. Having an EIN also allows you to build the business's credit score, which is separate from your personal credit score. A strong business credit score can lead to better interest rates and loan opportunities.

For single-member LLCs, an EIN can help maintain the personal liability protection for the owner that the single-member LLC normally provides. The added protection is helpful when a court is considering whether the LLC owner treated the business like a sole proprietorship or as a separate business entity. If a judge decides the former, the judge might hold the owner personally responsible for the debts and obligations of the business. While an EIN is no guarantee that liability protection will always result in intact liability protection, having the number is a simple step to take to decrease the likelihood of losing protection.

How Do You Apply for an EIN?

You can apply for an EIN from the IRS in various ways. The easiest way to apply for an EIN is online through the IRS website. If you apply online or by phone, you'll receive your EIN immediately. For more detailed instructions, read our article on how to get an EIN.

Consulting a Business Attorney

In most cases, you'll be able to figure out whether your business needs an EIN. However, your circ*mstances might be complicated. Or, you might not be required to get an EIN but you want advice on whether it makes sense for your business. In these instances, it might be a good idea to talk with a business attorney. A lawyer will help you work through your options and advise you on your legal obligations to the IRS.