An Employer Identification Number (EIN) is a critical federal identifier issued by the Internal Revenue Service (IRS). It is required for most U.S. businesses to operate legally, hire employees, open bank accounts, and comply with tax filing obligations. Understanding when and how to obtain an EIN is essential for new businesses at the formation stage.
This guide explains what an EIN is, who needs it, how to apply, and common compliance considerations for U.S. businesses.
What Is an EIN?
An EIN is a nine-digit federal tax identification number assigned by the IRS to identify a business entity. It functions similarly to a Social Security Number (SSN) for individuals but is used exclusively for business-related tax and reporting purposes.
The EIN is used by:
- The IRS for federal tax filings
- Banks for opening business accounts
- Payroll processors for employee wage reporting
- State agencies for tax and employment registrations
Who Needs an EIN?
Most newly formed businesses are required to obtain an EIN. You generally need an EIN if your business:
- Operates as a corporation or partnership
- Is an LLC with more than one member
- Is a single-member LLC that elects corporate taxation
- Has or plans to hire employees
- Is required to file employment, excise, or certain federal tax returns
- Opens a business bank account
- Withholds taxes on income paid to non-resident aliens
- Establishes a retirement or employee benefit plan
Even sole proprietors without employees often obtain an EIN to avoid using their SSN for business activities.
When Should a Business Apply for an EIN?
An EIN should be obtained immediately after business formation and before engaging in key operational activities such as:
- Opening a business bank account
- Running payroll
- Issuing invoices under the business name
- Filing federal or state tax returns
Delays in obtaining an EIN can lead to compliance issues, banking delays, or incorrect tax filings.
Information Required to Apply for an EIN
Before applying, the following information should be finalized:
- Legal business name (as registered with the state)
- Trade name (DBA), if applicable
- Business entity type (LLC, corporation, partnership, sole proprietorship)
- State and date of formation
- Responsible party’s name and SSN/ITIN
- Business address and mailing address
- Description of primary business activity
- Expected number of employees (if any)
Accuracy is essential, as errors may require correction through the IRS.
Methods to Apply for an EIN
1. Online Application (IRS Website)
- Fastest and most commonly used method
- EIN is issued immediately upon successful submission
- Available to applicants with a U.S. SSN or ITIN
- Limited to one EIN per responsible party per day
2. Fax Application
- Suitable for applicants without online eligibility
- Processing typically takes several business days
- Requires submission of Form SS-4
3. Mail Application
- Longest processing time
- Typically used in special circumstances
4. International Applicants
- Businesses without a U.S. SSN or ITIN can still obtain an EIN
- Requires additional IRS coordination and documentation
EIN for Different Business Structures
LLCs
- Single-member LLCs may use an EIN even if taxed as a disregarded entity
- Multi-member LLCs must obtain an EIN
- LLCs electing S-corp or C-corp taxation require an EIN
Corporations
- C corporations and S corporations must obtain an EIN
- EIN is required regardless of employee count
Partnerships
- All partnerships must obtain an EIN
- Required for filing partnership tax returns and issuing partner tax documents
Common EIN Mistakes to Avoid
- Applying for multiple EINs unnecessarily
- Using incorrect legal entity type
- Listing an incorrect responsible party
- Applying before state formation is completed
- Failing to update the IRS when business details change
These errors can cause delays in tax filings, payroll processing, and banking approvals.
EIN Updates and Changes
An EIN generally does not change, but businesses may need to notify the IRS if there are:
- Changes in ownership or structure
- Changes in business name or address
- Changes in responsible party
Certain structural changes may require a new EIN, depending on IRS rules.
How Trusty Accounts Supports EIN Registration
Trusty Accounts assists new and growing businesses by:
- Determining EIN requirements based on entity structure
- Preparing accurate EIN applications
- Coordinating EIN registration with state and federal compliance
- Aligning EIN setup with payroll, tax, and accounting systems
- Supporting multi-state and international business owners
Proper EIN registration is a foundational step in building a compliant and scalable business.
Conclusion
Securing an EIN is one of the most important compliance steps for a new business in the United States. Whether forming an LLC, corporation, or partnership, obtaining the EIN correctly and on time ensures smooth banking, payroll, and tax operations. Businesses that handle EIN registration accurately from the start reduce the risk of regulatory issues and operational delays.