An EIN (Employer Identification Number) is a nine-digit number assigned by the Internal Revenue Service (IRS) to businesses operating in the United States. It is used for tax purposes and serves as a unique identifier for business entities.
It is issued by IRS free of cost for the purpose of tax administration.A federal tax identification number is another name for EIN.
The requirement for obtaining an Employer Identification Number (EIN) in the United States depends on the structure and nature of your business. Here are some common situations where an EIN is typically required:
- Hiring employees: If your business has employees, including full-time, part-time, or temporary workers, you are generally required to have an EIN. The EIN is used to report employment taxes, withholdings, and other related obligations.
- Forming a corporation or partnership: When establishing a corporation, partnership, or limited liability company (LLC) with multiple members, an EIN is typically necessary. This allows the IRS to identify the business entity separately from its owners.
- Filing certain tax returns: Some tax returns, such as employment tax returns (e.g., Form 941), corporate income tax returns (e.g., Form 1120), or partnership tax returns (e.g., Form 1065), require an EIN for proper identification and reporting.
- Opening a business bank account: Most financial institutions require an EIN to open a business bank account. It helps distinguish the business account from personal accounts and facilitates accurate record-keeping.
- Engaging in specific business activities: Certain business activities, such as operating as an excise taxpayer, participating in certain retirement plans, or being involved in estate or trust administrations, may require an EIN.
