What Is an EIN and How Do You Get One for Free?

An Employer Identification Number, or EIN, is a nine-digit number the IRS uses to identify a business for tax purposes. Think of it as a Social Security number for your company. Whether you’re starting a new business or formalizing a side hustle, understanding when you need an EIN and how to get one, for free, is an important early step.

What an EIN is used for

An EIN, sometimes called a federal tax identification number, identifies your business on tax returns and other documents filed with the IRS. You’ll use it when filing business tax returns, reporting employment taxes, opening business bank accounts, applying for business licenses and permits, and providing tax information to clients and vendors.

Despite the name, you don’t need to have employees to get or use an EIN. Many businesses without employees have one.

Who needs an EIN

According to the IRS, you generally need an EIN if your business has employees, operates as a corporation or partnership, files certain tax returns, such as employment, excise or alcohol, tobacco and firearms returns, withholds taxes on income paid to a nonresident alien, or has certain types of retirement plans. Certain trusts, estates, nonprofit organizations and other entities also need EINs.

Limited liability companies may or may not need an EIN depending on how they’re taxed and whether they have employees. A single-member LLC without employees that is taxed as a sole proprietorship may not be required to have one for federal income tax purposes, though it may still need one for other reasons, such as state requirements or banking. Multi-member LLCs generally need an EIN.

Many sole proprietors without employees can use their Social Security number for business tax purposes instead. However, getting an EIN can still be a smart choice.

Why sole proprietors often get one anyway

Getting an EIN can help protect your personal information. When you work with clients, they may ask for your taxpayer identification number to report payments they make to you. Providing an EIN instead of your Social Security number reduces the number of places your Social Security number is shared, which can lower the risk of identity theft.

Banks often ask for an EIN to open a business bank account, especially for LLCs. Keeping business and personal finances separate makes bookkeeping and tax preparation much easier. An EIN can also make your business appear more established to clients and vendors.

How to apply

The IRS offers an online EIN application on its official website, irs.gov. The online application is available during set hours on weekdays, and the IRS says that if you complete it online, you’ll generally receive your number immediately after your information is validated. You can then download, save and print your confirmation notice.

The application asks for basic information about your business, such as its legal name, address, type of entity, the reason you’re applying and information about the responsible party. The responsible party is the individual who ultimately owns or controls the business, and you’ll need that person’s Social Security number or other taxpayer identification number.

You must complete the online application in one session, since you can’t save your progress and return later. Gather the information you need before you start.

You can also apply by fax or by mail using Form SS-4, though these methods take longer. International applicants who don’t have a U.S. taxpayer identification number can apply by phone.

Watch out for look-alike websites

Some third-party websites look official and charge fees to apply for an EIN on your behalf. While not necessarily illegal, these services charge for something you can do yourself for free in minutes. Some may also collect personal information unnecessarily.

Make sure you’re on the official irs.gov website before entering any information. Search results sometimes show paid advertisements for third-party services above the official IRS page, so double-check the web address.

After you get your EIN

Store your EIN confirmation notice with your important business records. The IRS may not be able to resend the original notice, though you can request a verification letter if needed. You’ll need your EIN for many purposes, including tax filings, opening bank accounts, applying for business licenses, completing Form W-9 for clients and paying contractors or employees.

If you hire employees, you’ll also need to register with your state for payroll taxes and unemployment insurance, and follow federal and state requirements for withholding and reporting.

When you might need a new EIN

Generally, a business keeps the same EIN for its lifetime. However, certain changes may require a new one, such as changing your business structure, for example from a sole proprietorship to a corporation, or in some cases when ownership changes. The IRS provides guidance on when a new EIN is needed.

A simple but important step

Getting an EIN is quick, free and an important part of setting up your business properly. Combined with a separate business bank account and good recordkeeping, it lays a solid foundation for managing your business finances and taxes.