What Is an EIN and Do I Need One for My Small Business?

An EIN (Employer Identification Number) is a nine-digit number the IRS assigns to identify your business for federal tax purposes. Think of it as a Social Security number for your business. Despite the name, you don't need employees to get one.

Who is required to have an EIN?

You generally need an EIN if your business:

• Has employees
• Is a multi-member LLC or a partnership
• Is a corporation, or an LLC that elects to be taxed as an S corporation or C corporation
• Files certain excise or employment tax returns
• Has a retirement plan such as a Solo 401(k) in some cases

What if I'm a sole proprietor or single-member LLC?

If you're a sole proprietor or a single-member LLC with no employees, an EIN is often optional for federal tax purposes. You could use your Social Security number instead. But we almost always recommend getting one anyway. Here's why:

• Privacy. When clients ask you for a W-9, you can give them your EIN instead of your Social Security number. That reduces the risk of identity theft.
• Banking. Most banks require an EIN to open an LLC business account.
• Professionalism. Vendors, wholesalers and payment platforms often expect one.
• Future growth. If you hire or elect S-corp status later, you'll need it anyway.

How to get an EIN

Apply directly on the IRS website. It's free and, for most applicants, you receive your number immediately at the end of the online application. Be careful of websites that charge a fee to "get your EIN"; they're simply filling out the free IRS form for you.

Have this ready:

• Your legal business name (exactly as registered with the state)
• Your business address
• The responsible party's name and Social Security number
• Your entity type and the reason you're applying

Save the confirmation letter (CP 575) as a PDF. Banks sometimes ask for it, and replacing it later takes time.

EIN vs. UBI number

In Washington, you'll also have a UBI number. The UBI identifies your business with Washington State agencies like the Department of Revenue and Secretary of State. The EIN identifies your business with the IRS. You need both, and they are not interchangeable.

Common EIN mistakes

• Applying before your LLC is approved, then having a name mismatch
• Choosing the wrong entity type on the application
• Applying for a second EIN when you already have one
• Losing the confirmation letter

The bottom line

An EIN is free, fast and protects your personal information. If you're starting a business, get one right after your entity is formed and before you open a bank account.

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Need help getting this right? TRIG Bookkeeping & Tax Services helps new business owners in Washington with company registration, monthly and annual bookkeeping, and government compliance. Contact us to talk about your business.

This article is general information, not legal or tax advice for your situation. Tax rules and fees change, so confirm current details with the IRS, the Washington Department of Revenue, or a qualified professional.