What is an EIN Number and Why Is It Important?

An Employer Identification Number (EIN) is a unique nine-digit number assigned to a business by the Internal Revenue Service (IRS). It is used to identify the tax accounts of employers and certain others who have no employees. The EIN is a necessary piece of information for filing taxes, opening a business bank account, filing for permits, and forming business entities. An EIN can also be referred to as a Federal Tax Identification Number, and businesses are required to obtain one in order to remain in compliance with federal and state regulations.

What Is the Purpose of an EIN Number?

The EIN is used to identify a business entity and is used for filing business returns and other reports to the IRS. It is similar to a Social Security number, but is intended for use with businesses instead of individuals. Once assigned, an employer identification number is exclusive to the business it is assigned to and cannot be reused or assigned to any other business.

When Do Businesses Need an EIN Number?

The most common circumstance that necessitates the need for an EIN is when a business is filing taxes. Businesses with employees will be required to obtain an EIN in order to file tax returns, process payroll and withhold taxes from employee checks. Those businesses with more than one owner will be required to obtain an EIN for the business. Entrepreneurs who are self-employed and do not have to pay taxes with an employer will likely have to get an EIN as well. An EIN may also be necessary for businesses that are entrepreneurs with employees, have multiple owners, submit contracts with the state, hire independent contractors, open a business bank account or apply for a business loan.

How Do I Get an EIN Number?

The process of obtaining an EIN is relatively easy. Business owners can apply for one via the IRS website or through the mail. It is free to obtain an EIN, so anyone looking to do so should not be expected to pay a fee. Once an application is received, applicants will usually be assigned an EIN within one business day.

In conclusion, an EIN is an essential piece of information that businesses need to stay in compliance with various government regulations. It is a unique nine-digit number used to identify a business, similar to a Social Security number for individuals. Businesses may need to obtain an EIN when filing business returns, processing payroll, submitting contracts with the state, opening a business bank account, or applying for a loan. Obtaining an EIN is easy and free, and the IRS typically issues one within one business day.