EIN Number: How to Get an Employer Identification Number

Quick Take

Your EIN number (Employer Identification Number) is essentially a Social Security number for your business — and you’ll need one for almost everything business-related, from opening a bank account to filing taxes. The biggest mistake new business owners make? Thinking they can skip getting an EIN if they’re a sole proprietor or single-member LLC. You technically can, but you shouldn’t.

Even if you’re allowed to use your Social Security number, getting an EIN protects your personal information and makes you look more professional. Plus, you’ll need it anyway once you hire employees, make an S-Corp election, or open a business bank account.

How This Tax Works (Plain English)

An EIN (Employer Identification Number) is a nine-digit federal tax identification number that the IRS assigns to your business. You’ll see it formatted like this: XX-XXXXXXX. Think of it as your business’s unique identifier for all tax purposes.

Here’s what most people get wrong: the name “Employer Identification Number” makes it sound like you only need one if you have employees. That’s not true. You’ll use your EIN for filing business tax returns, opening business bank accounts, applying for business licenses, and handling payroll (even if it’s just paying yourself).

The one thing to understand before anything else: Your EIN stays with your business entity forever. If you dissolve your LLC and start a new one — even with the same name — you’ll need a new EIN. But if you keep the same business entity and just change your business name or address, you keep the same EIN.

Different business structures handle EINs differently, but every legitimate business structure can get one. The key is understanding when you’re required to have one versus when it’s just smart business practice.

How Different Entity Types Handle This

Sole Proprietorship / Single-Member LLC (Default)

As a sole proprietor or single-member LLC (taxed as a disregarded entity), you’re technically allowed to use your Social Security number instead of an EIN. The IRS treats your business income as personal income for tax purposes.

But here’s why you should get an EIN anyway: Most banks require an EIN to open a business account. You don’t want to give your SSN to every vendor, client, or service provider who asks for a tax ID number. And if you ever want to hire employees or make an S-Corp election, you’ll need an EIN.

Example: Sarah runs a freelance graphic design business as a sole proprietor. She could use her SSN, but she gets an EIN to open a business checking account and keep her personal information private when clients request a tax ID for their 1099 forms.

Multi-Member LLC (Partnership Taxation)

Multi-member LLCs are taxed as partnerships by default, and partnerships are required to have an EIN. No choice here — you must get one.

The LLC itself doesn’t pay income taxes. Instead, profits and losses pass through to the members’ personal tax returns. But the LLC still files an informational return (Form 1065) using its EIN to show how income was allocated among members.

Example: Mike and Jennifer form an LLC to run their consulting business. Even though they each pay taxes on their share of profits on their personal returns, the LLC needs an EIN to file Form 1065 and handle business banking.

S-Corporation: The Self-Employment Tax Strategy

When you make an S-Corp election (Form 2553), your business must have an EIN. If you formed as an LLC and elect S-Corp taxation, you keep your existing EIN — you don’t need a new one.

S-Corps are pass-through entities like LLCs, but with a key difference: you must pay yourself a reasonable salary subject to payroll taxes, and additional profits can be distributed without self-employment tax.

Example: David’s single-member LLC earned $90,000 in net profit. As a default LLC, he’d pay self-employment tax on the full $90,000. With an S-Corp election, he pays himself a $60,000 salary (subject to payroll taxes) and takes $30,000 as distributions (no self-employment tax). He saves roughly $4,200 annually in taxes.

C-Corporation: When Double Taxation Isn’t as Bad as It Sounds

C-Corporations must have an EIN and are the only business structure that pays corporate income tax. This creates “double taxation” — the corporation pays taxes on profits, and shareholders pay taxes again on dividends.

But if you’re not taking dividends and instead paying yourself a salary and reinvesting profits, you might only face single taxation. Plus, C-Corps get certain tax benefits like deducting employee health insurance premiums.

Example: Lisa’s tech startup is a C-Corp that reinvests all profits into growth. She pays herself a $75,000 salary (deductible business expense for the corporation), and the company pays corporate taxes on remaining profits. No dividends means no double taxation this year.

Entity Type	EIN Required?	Tax Treatment	Self-Employment Tax
Sole Proprietorship	No, but recommended	Personal return (Schedule C)	Yes, on all profit
Single-Member LLC	No, but recommended	Personal return (Schedule C)	Yes, on all profit
Multi-Member LLC	Yes	Partnership (Form 1065)	Yes, on all profit
S-Corporation	Yes	Pass-through (Form 1120S)	Only on salary portion
C-Corporation	Yes	Corporate (Form 1120)	No (you’re an employee)

The S-Corp Decision

The S-Corp election is probably the most misunderstood tax strategy for small businesses. Here’s how it actually works and when it makes sense.

What the S-Corp Election Actually Does

When you elect S-Corp taxation, you become an employee of your own business. You must pay yourself a reasonable salary for the work you do, just like any other employee. The IRS requires this salary to be comparable to what you’d pay someone else to do your job.

After paying your salary, any additional profits can be distributed to you as an owner distribution. These distributions aren’t subject to self-employment tax (Social Security and Medicare taxes), which is where you save money.

The Salary vs. Distribution Split

Let’s say your business makes $100,000 in profit. As a regular LLC, you’d pay self-employment tax on the entire $100,000. With an S-Corp election, you might pay yourself a $70,000 salary and take $30,000 in distributions.

You’ll pay payroll taxes on the $70,000 salary, but not on the $30,000 distribution. That saves you about $4,600 annually (15.3% self-employment tax on $30,000).

When the Math Starts Making Sense

The general rule: If your business shows consistent net profit above $60,000-$80,000, talk to a CPA about the S-Corp election. Below that threshold, the additional costs usually outweigh the tax savings.

Additional ongoing costs include:

Quarterly payroll processing and tax deposits
Annual payroll tax returns (940, 941, W-2s)
More complex business tax return (Form 1120S)
Higher CPA fees for tax preparation

How to Make the Election

File Form 2553 with the IRS to elect S-Corp taxation. You can make this election when you form your business or anytime during the tax year, but it must be filed by March 15th to be effective for that tax year.

Important timing note: If you miss the March 15th deadline, your election won’t take effect until the following tax year. Some CPAs can request late election relief in certain circumstances, but don’t count on it.

Practical Tax Strategies

Getting Your EIN: The Actual Process

You can get an EIN directly from the IRS for free. The fastest way is online through the IRS website — it takes about 15 minutes and you get your EIN immediately. You can also apply by phone, fax, or mail, but those methods take longer.

What you’ll need ready:

Your business legal name and any trade name (DBA)
Business address and mailing address
Type of entity (LLC, corporation, etc.)
Reason for applying (starting new business, banking purposes, etc.)
Name and SSN of the responsible party (usually you)

Record-Keeping Habits That Save Money

Keep your EIN documentation safe. The IRS sends an official EIN letter, and you’ll need this for banking, licensing, and other business purposes. Make several copies and store the original in your business files.

Track your EIN usage. If you have multiple businesses, make sure you’re using the correct EIN for each entity. Mixing them up on tax returns or bank accounts creates headaches later.

Estimated Quarterly Tax Payments

Once you have your EIN and start earning business income, you’ll likely need to make quarterly estimated tax payments. This applies whether you’re an LLC, S-Corp, or C-Corp — though the calculation methods differ.

The safe harbor rule: If you pay 100% of last year’s total tax liability through estimated payments (110% if your prior year AGI exceeded $150,000), you won’t owe penalties even if you owe additional tax when you file.

When to Get Professional Help

Hire a CPA if any of these apply:

Your business shows annual profit above $75,000 and you’re considering an S-Corp election
You’re switching entity types or tax elections
You have multiple business entities or complex ownership structures
You’re being audited or received an IRS notice
You’re planning to sell your business or bring on investors

CPA vs. EA vs. Tax Preparer

A CPA (Certified Public Accountant) can handle complex business structures, provide strategic tax planning, and represent you before the IRS. An EA (Enrolled Agent) specializes specifically in tax matters and can also represent you before the IRS, often at lower rates than CPAs.

Regular tax preparers can handle straightforward returns but can’t represent you if issues arise. For most small businesses, a good EA or CPA who understands business taxes is worth the investment.

What to have ready when you meet with a tax professional:

Your EIN letter and business formation documents
Previous year’s tax returns (personal and business)
Current year’s profit and loss statement
Information about your business goals and growth plans

FAQ

Do I need an EIN if I’m just a freelancer?

You don’t legally need one as a sole proprietor, but you should get one anyway. Banks typically require an EIN for business accounts, and it protects your Social Security number when clients request tax ID information for 1099s.

Can I get an EIN before I officially form my LLC or corporation?

No, you need to form your business entity with the state first, then apply for the EIN. The IRS requires your official business name and entity type to issue an EIN.

What happens to my EIN if I dissolve my business?

The EIN stays with that specific business entity forever, even after dissolution. If you start a new business later — even with the same name — you’ll need a new EIN for the new entity.

Can I change my EIN if I switch from LLC to corporation?

If you’re converting your existing LLC to a corporation (not dissolving and starting fresh), you typically keep the same EIN. But if you dissolve the LLC and form a new corporation, you need a new EIN.

How long does it take to get an EIN?

Online applications through the IRS website are processed immediately during business hours. Phone applications take about 15 minutes. Mail and fax applications can take several weeks.

Do I need a separate EIN for each state if I operate in multiple states?

No, your federal EIN works in all states. However, some states assign their own state tax ID numbers for state tax purposes, which is separate from your federal EIN.

Conclusion

Getting an EIN number is one of the simplest but most important steps in legitimizing your business. Even if you’re not legally required to have one, the practical benefits — business banking, privacy protection, professional credibility — make it essential for any serious business owner.

The process is free, fast, and straightforward when you go directly through the IRS. Once you have your EIN, keep that documentation safe and use it consistently across all your business activities.

TrustedLegal.com handles the paperwork so you can focus on building your business. We file your LLC or corporation with the state, get your EIN, provide a registered agent, and help you stay compliant year after year — with affordable pricing, fast turnaround, and real support when you have questions. Our team has helped thousands of entrepreneurs form LLCs, corporations, and nonprofits across all 50 states, handling state filing, EIN registration, registered agent service, and ongoing compliance with transparent pricing and expert support throughout the process. Get started today.

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This article is for educational purposes and does not constitute tax advice. Consult a qualified tax professional for guidance specific to your situation.