Last Updated August 27, 2025
Before starting a business, you need to cover certain tax considerations, like requesting an employer identification number (EIN).
An EIN is like a Social Security number for your business: the IRS uses it to track your company’s finances and tax payments. However, an EIN isn’t quite the same as your personal Social Security number, and not all business owners need one.
In this guide, you’ll learn what an EIN is for, the benefits of an EIN for a sole proprietorship, and tips for getting an EIN quickly.
What Does EIN Stand for?
EIN stands for “employer identification number.” The IRS issues this nine-digit number to identify your business for tax purposes. You need one if you’re operating an LLC or corporation, but it’s not mandatory for some sole proprietors. Still, requesting an EIN comes with many benefits and few downsides, so it’s worthwhile if you plan on starting a business.
What Does an EIN Look Like?
Every EIN is a nine-digit number that lists two digits followed by a hyphen, and then the remaining seven digits: XX-XXXXXXX. The first two digits stand for the IRS campus that issued your EIN, while the remaining seven digits are a unique identifier just for your business.
EINs are formatted like this to quickly distinguish EINs from Social Security numbers, which are also nine digits, but follow this format: XXX-XX-XXXX. If you receive documents from other businesses or an employer, you’ll see the EIN printed in this exact format (XX-XXXXXXX), whether on W-2s, tax filings, or business registration documents.
What Is an Employer Identification Number (EIN) Used for?
Knowing what an EIN is used for, from filing taxes to opening a business bank account, will help you see why this small string of numbers is such a big deal. You need an EIN to:
- Open a business bank account
- Separate your personal
- Social Security number from your business finances and taxes
- Hire your first employee
- Apply for business licenses
- Request loans from a bank
- Build your business credit score
- Work with enterprise or international clients
Your EIN is the go-to identifier for almost all business-related transactions with the IRS and other agencies. However, it’s also known by many other names. Understanding the differences between these identifying numbers will help you avoid administrative headaches and rework.
EIN vs. TIN
Taxpayer identification number (TIN) is an umbrella term that refers to all identification numbers. Both SSNs and EINs fall under this umbrella. Put simply, every EIN is a TIN, but not every TIN is an EIN. So, if a form requests your TIN, and you’re applying for something business-related, it wants your EIN.
EIN vs. FEIN
A federal employer identification number (FEIN) is the same as an EIN. The “F” implies the federal government issued it. You may encounter both terms in different forms or in other contexts, but there is no distinction in how they are used or what they represent.
The only confusion sometimes comes up when “EIN” is mistakenly used to refer to a state employer or business tax ID, but when it comes to federal identification, FEIN and EIN are the same.
EIN vs. Tax ID Number
“Tax ID” is another generic term that’s synonymous with TIN. It can refer to different identifiers, but in a business context, it almost always refers to your EIN. If you see “Tax ID” on an application for a bank account, license, or permit, chances are they mean your EIN.
Who Needs an EIN?
You need an EIN if:
- You have employees
- You file employment taxes
- You withhold taxes paid to non-resident aliens
- You offer retirement plans
- Your business is a corporation, partnership, or multi-member LLC
- You run a nonprofit
- You want to open a bank account or apply for a loan
You likely don’t need an EIN if you’re a sole proprietor or have a single-member LLC, provided you don’t fall into any of the categories above.
Benefits of Having an EIN
Many businesses apply for an EIN even though they aren’t required to have one. That’s because there are many benefits of having an EIN, from future-proofing your business to building credit.
Separate Personal Finances
Combining personal and business finances not only makes it harder to budget, but it also increases personal liability. An EIN helps you keep your business expenses and income separate from your personal finances, which simplifies everything from bookkeeping to tax preparation.
Build Business Credit
Using an EIN allows you to build a credit history for your business independently from your personal credit. With an EIN, you can apply for business credit cards, vendor accounts, and financing, all under your business’s name instead of your own.
Access Business Banking
Separating your business and personal finances is a best practice, but regardless of your legal structure, you’ll need an EIN to open a business banking account. This step not only legitimizes your business but also makes it easier to track income and expenses.
Hire Employees
If you have a sole proprietorship or single-member LLC, you may think you don’t need an EIN. That’s true for now, but what if you want to hire employees in the future? Requesting an EIN now future-proofs your business, laying the foundation for the potential to hire additional help as the company grows.
Be Professional
Having an EIN conveys that you are a legitimate, professional business. It can make it easier to attract customers, partners, and lenders, and generally be taken more seriously. Plus, using an EIN reduces the need to share your Social Security number with clients and vendors, which minimizes the risk of identity theft.
How Do You Apply for an EIN?
Applying for an EIN is straightforward:
- Visit the IRS website and use the EIN Assistant tool. This is a simpler digital version of Form SS-4.
- Provide information about your business, including its legal name, address, your name, entity information, reason for applying, business founding date, your industry, and whether you plan on hiring employees right away. It takes about 15 minutes to complete the online application, but having this information ready will speed up the process.
- Upon submission, you’ll receive your EIN immediately.
How Long Does It Take to Get an EIN Number?
If you apply online, you can get an EIN number in as little as 15 minutes.
Although you can request an EIN using the SS-4 form by mail, the process is much slower. Fax applications can take about four business days, while mail applications may take four to six weeks. It’s best to request an EIN number online, which gives you the number immediately.
How Much Does an EIN Cost?
It’s free to get an EIN, provided you request one through the official IRS website. The IRS doesn’t charge a fee for issuing an EIN, whether you apply online, by fax, or by mail.
However, some third-party sites may try to charge you for an EIN application service. Some are legitimate, but this service is usually unnecessary and expensive. Getting an EIN is as simple as applying for a number on the IRS website, which you can complete yourself quickly and at no cost.
In-Summary: What Are EIN Numbers?
An employer identification number is a nine-digit code the IRS uses to identify your business for tax and legal purposes. If you’re a sole proprietor or a single-member LLC, you may not technically need an EIN, but it’s still beneficial. An EIN allows you to open a business bank account, request loans, and hire employees to grow your business.
EIN numbers are free, and obtaining one takes only a few minutes. With so many benefits and nearly zero downsides, requesting an EIN is a solid first step to legitimizing your business.
EIN Number FAQs
How many EIN numbers can you have?
You need one EIN for every business entity you own. So, if you own more than one business, you’ll need multiple EINs. However, the IRS will only issue one EIN per day for security reasons, so you may need to spread out your applications.
Where can I find my EIN after obtaining it?
Your EIN will be listed on the confirmation letter from the IRS (Form CP-575). You can also find it on past tax returns, bank account documents, or by calling the IRS Business & Specialty Tax Line.
What is a “responsible party” on your EIN application?
The “responsible party” is the individual or entity that controls, manages, or directs the business and its assets. This person must have a valid taxpayer identification number, like a Social Security number.
What disqualifies you from getting an EIN?
The IRS would deny you an EIN if your application is incomplete or has errors. Additionally, you can’t get an EIN if the responsible party doesn’t have a taxpayer identification number.
What are the downsides of getting an EIN?
Some business owners dislike the learning curve of business tax filings and compliance requirements that come with using an EIN. Having an EIN can add administrative work to your plate if you don’t need one, but the added work is marginal compared to its benefits.
How do you find your employer identification number without a W-2?
You can locate it on your original IRS EIN confirmation letter, tax returns, business licenses, or bank records. If all else fails, call the IRS for help.
Do I need an EIN as a sole proprietor?
Technically, no. Still, many sole proprietors choose to get one to enjoy the benefits of an EIN for a sole proprietorship, such as separating personal and business finances and protecting their Social Security number.
How do I find out when my EIN was issued?
The issue date appears on your IRS confirmation letter. If you’ve misplaced it, the IRS can provide the information over the phone after verifying your identity.
Michael McCareins is the Content Marketing Associate at altLINE, where he is dedicated to creating and managing optimal content for readers. Following a brief career in media relations, Michael has discovered a passion for content marketing through developing unique, informative content to help audiences better understand ideas and topics such as invoice factoring and A/R financing.
