What Business Entities Need an EIN?

what business entities need an ein

Discover the basics for what business entities need an employer identification number.

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If you own multiple businesses, you might be wondering, “Do I need an EIN for each business?” Another important question: what business types need an EIN?

An EIN is often a crucial component of running a business, but not all businesses need one. In this guide, we’ll walk you through the essentials of EINs: what it is, how to get one, and which businesses need one.

What is an EIN?

“EIN” stands for employer identification number. Sometimes called a federal employer identification number, tax identification number, or federal tax ID number, the EIN is a nine-digit number that identifies a business. In many ways, it’s like a Social Security number for a business.

You can get an EIN for free through the IRS online, by mail, or by fax. We also offer EIN filing service, if you’d rather have help for this process.

Do I need an EIN to start a business?

You don’t necessarily need an EIN to start a business, but there’s a good chance you’ll need one to run it. If you meet any of the IRS criteria for an EIN, you’ll need to apply for one. You should apply for your EIN as soon as the criteria applies. For example, when you hire your first employee — or better yet, when you first decide to interview your first candidates — you should submit your EIN application. That will get you set up for employment taxes and withholding for income taxes in a timely fashion.

Who needs an EIN?

There are quite a few different business types that need to obtain an EIN. Find yours below.

Sole Proprietorship

Sole proprietorships are businesses operated by a single person that don’t file registration paperwork with their state. For example, if you start selling handmade blankets in your spare time, you’re a business owner operating as a sole proprietorship.

Not all sole proprietorships need an EIN. If you’re a solo operation, you might opt not to get one. But if you hire employees, owe excise taxes, or have a Keogh plan, you’ll need one. You might also need one if you want to use a business bank account.

Partnership

“Partnership” is a broad term for several types of businesses: general partnerships, limited partnerships, and limited liability partnerships. General partnerships are some of the most common ones. While some partnerships have to register with their Secretary of State in order to form and others don’t, all partnerships must obtain an EIN.

EINs are required for businesses with more than one owner, even if they don’t have employees. The EIN establishes a tax account for a partnership so the IRS can accept (and expect) its Partnership Return of Income (Form 1065) at tax time.

Limited Liability Company

Limited liability companies (LLCs) are a type of entity created by state statute. They’re separate legal entities that must register with their state to form; they can be owned by one member (called a single-member LLC) or multiple members (multi-member LLCs). LLCs enjoy flexible ownership, easy maintenance, and limited liability protection.

Not all LLCs need an EIN, but many do. Any LLC that has more than one member, has employees, owes excise tax, or has a Keogh plan must get an EIN. Some single-member LLCs can opt not to get an EIN, but many find it helpful to get one so they can obtain a business bank account.

Corporation

Corporations are business structures that are owned by shareholders and governed by a board of directors. They’re a popular entity choice because they allow for personal asset protection and start-up capital by selling shares. Corporations are separate legal entities from their owners.

All corporations have to obtain an EIN, regardless of whether they have employees or not.

Nonprofit Organizations

Nonprofits are entities formed for some sort of public, social, or private benefit. Often, they’re charities and activism groups. Nonprofits can be structured as a few different entity types, but they’re commonly organized as nonprofit corporations.

Nonprofit corporations must obtain an EIN simply because they’re a type of corporation. Other nonprofits might need an EIN if they’re going to apply for tax-exempt status or if they have employees.

Foreign Entities

Business structures from other countries that want to operate in the U.S. need to obtain an EIN to do so compliantly. This requirement stacks with other registration requirements. Please note that international entities are the only ones that may apply for the EIN by phone.

Other Qualifying Entities

There are a few other groups that might need to obtain an EIN. According to the IRS, here are some of the other criteria that would qualify you for needing an EIN:

  • Having a Keogh plan
  • Being certain types of trusts, such as an irrevocable trust or other qualifying estate
  • Being a real estate mortgage investment conduit
  • Forming a farmers’ cooperative
  • Being a plan administrator

If you meet any of these criteria, you must apply for an EIN. Some independent contractors also decide to get an EIN to protect their personal Social Security numbers, but it’s not a legal requirement. 

How to Apply for an EIN

There are three primary methods you can use to file: online, fax, and mail. No matter how you file, your application is free through the IRS. Filing online is limited to businesses that are domestic to the United States. If you opt to file online, you can use the IRS internet application.

If you prefer to file a paper form, you’ll have to complete the application form, Form SS-4. Then you can fax or mail it to the appropriate mailing address or fax number (if you’re not sure where to send it, check out the IRS page “Where to File Your Taxes for Form SS-4”).

International entities are allowed to apply for their EIN using the IRS’s phone services.

No matter how you file, you’ll need to submit some basic information, such as your principal business address, your basic business activities, the name and taxpayer identification number of the responsible party, and more.

Common Mistakes to Avoid

The form SS-4 can feel a little overwhelming, so be prepared to avoid some common mistakes. For starters, keep in mind that the IRS has a strict policy of only issuing one EIN to each responsible party (the true individual responsible for it) each day. If you own multiple businesses or otherwise need more than one EIN, it’ll take multiple days.

Beyond that, you’ll want to make sure you fill in only the appropriate sections; the bottom of the form instructs you as to which lines to complete based on your reason for applying. If you have someone complete this form on your behalf, you’ll also need to complete the third-party authorization section, too.

Our EIN service can help you skip the hassle and the mistakes in one go.

Reasons Why an EIN May Be Revoked

Usually, an EIN is perpetual unless you cancel it yourself. However, there are a few circumstances when one might be revoked. Here are a few scenarios:

  • Failure to file tax returns: If you don’t file and pay your taxes, your entire entity may be in trouble to the point where you’re forced to shut down. Your EIN might be canceled, too.
  • Providing false information during the application: Putting incorrect information — intentionally or not — may void your EIN. This could include putting the incorrect responsible party, misrepresenting your entity type, and more.
  • Using the EIN for fraudulent purposes: Committing fraud under an EIN will likely get you into a lot of legal trouble, including losing your EIN.

We can help!

If you’re feeling overwhelmed about starting your business, don’t worry — you have ZenBusiness in your corner. We’ll handle the red tape for you. Whether you need help with business formation for an LLC or corporation or you want someone else to handle your EIN paperwork, we’ve got your back.

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Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

EIN Business Types FAQs

  • Qualifying entities need an EIN so they can be identified for tax purposes, much like a Social Security number is an identifying code for an individual. Creating an EIN allows the IRS to set up a business tax account for the entity.

    Whenever tax time rolls around, you’ll use your EIN on your federal tax returns, excise tax returns, state tax returns, and more. Business taxes are complicated, so we recommend consulting with a licensed tax attorney for assistance.

  • Yes and no — it depends. If you’re an entity with multiple owners or partners, you’ll need an EIN. But if you’re a single-owner entity like a single-member LLC or sole proprietorship, you’ll have to check if you meet any of the other criteria. If you don’t, you might not need an EIN. You can use your personal ‌ SSN at tax time instead. However, most banks require you to have an EIN to open a business bank account.

  • That depends on how you file Form SS-4. If you file online, your EIN will be given to you immediately after all your information is validated. Faxed and mailed forms take four business days or longer.

  • No. Every business entity must have its own distinct EIN.

  • If you’ve somehow misplaced or forgotten your EIN, don’t panic. You’re not alone. You can check previous tax returns for your EIN, check with your bank, or find the computer notice you received when you first applied. If those steps don’t work, you can call the IRS for assistance. As long as you provide the right information and you’re an authorized person (usually the owner), the representative will tell you the number over the phone.

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