What is EIN (Employer Identification Number)?

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Every company that has employees is required to have an employer ID number (EIN), but if you do not have employees in your company then also you will need EIN which is known as the Social Security number of your business.

For more information watch the video given below:


1. What is an EIN?

A number assigned by the Internal Revenue Service to identify a business for tax purposes is known as an EIN. You should include the tax ID of your business on bank account applications, income tax forms, and employment tax reports and payments. 

A business tax ID serves the same purposes as a Social Security number for individuals.

2. How is EIN different from a Taxpayer ID Number?

The term "taxpayer ID" can be one of the different numbers. An employer ID is referred to as a taxpayer ID for a business, whereas a Social Security number is a taxpayer ID for an individual. Another type of taxpayer ID is referred to as the "Individual Taxpayer ID." This is used by individuals who do not have a Social Security number.

3. Do you need EIN for your business?

You will require an EIN for your business if you have employees or if you file certain kinds of taxes. You will require one if your business is taxed as a corporation or a partnership.

EIN is not required for tax purposes if your business is a sole proprietorship — you are not registered with your state as an LLC, a corporation, or a partnership—and you don't have employees. In this case, your EIN is your Social Security number.

But an EIN might be required at the time you start your business and apply for a business checking account. You might also require one when you are applying for a business license.

4. When do you need a new EIN?

A new EIN is not required if you simply change the name or address of your business.

You do not require a new EIN if you make simple changes to your business, but if you change your legal business structure from a corporation to some other entity or from a sole proprietorship to a corporation, you may need a new EIN.

You should inform the IRS if your business changes and the IRS will inform you if you need a new EIN.

You must send a change request letter to the appropriate IRS address in case you made any mistake on your EIN application or if you submitted the wrong person as the responsible party in Item 3 on the form.

5. Tax-Exempt Organizations

Tax-exempt organizations have special rules. The IRS recommends you to make sure that the business structure of your organization is firmly nailed down before you apply for your EIN.

It is because you can lose your tax-exempt status if you make certain mistakes within three years, e.g. failing to file a return. The calendar begins with the date you get your EIN.

6. Are EINs recycled?

Your EIN is your taxpayer id. It cannot eventually end up with another business if your business ceases to operate. It will not expire. When you are finished with it, it will go forever.

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