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s a small business owner, one of your most important responsibilities is obtaining an EIN. Even if it isn’t always absolutely required, it can benefit your business multiple ways, from increasing your credibility to enabling you to obtain a business loan more easily. An EIN (Employer Identification Number) is an exclusive nine-digit number the IRS (Internal Revenue Service) assigns to allow your business to pay employees and manage business taxes. Ultimately, it functions as a way to identify your business. An EIN is similar to an SSN (Social Security Number), but for businesses instead of people. It is often referred to as a tax identification number or tax ID number. Learn more about EINs below.
Does my Business Need an EIN?
Depending on your business entity and circumstances, you may or may not be required to obtain an EIN. While business structures such as corporations and partnerships must obtain an EIN, others like sole proprietorships, qualified joint ventures, and some LLCs (Limited Liability Companies) do not.
Does a sole proprietor need an EIN?
Sole proprietors are also not always required to have an EIN. However, if any of the following apply, you must file for an EIN:
- Your business has employees.
- You want to offer a Keogh plan (a pension plan available to self-employed individuals) or a 401K retirement plan.
- You withhold some taxes to pay a non-resident alien.
- You file or intend to file employment, alcohol, firearms, or tobacco tax returns.
- Your business is linked to an estate, trust, or real estate investment.
- You need to file for bankruptcy.
Does a qualified joint venture need an EIN?
A qualified joint venture is a business owned and operated by a married couple. Although the IRS does not require spouses to obtain EINs — spouses are treated as sole proprietors for tax purposes — we recommend that, if this applies to you, you continue to maintain an already existing EIN if you have one. This can be beneficial if your business is ever at risk of losing its qualified venture status.
Does an LLC need an EIN?
Multi-member LLCs are required to have an EIN. On the other hand, single-member LLCs often aren’t required to have an EIN. However, this may not always be the case. If your single-member LLC does not meet specific requirements set by the IRS, you will need to obtain an EIN for your business. Do I need an EIN for my LLC?
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Why Should I Apply for an EIN?
You will use your EIN for various business activities, such as opening a business bank account, filing tax reports, hiring employees, applying for business licenses, or taking out a business loan from the bank. An EIN will boost your credibility and preparedness as an established and proactive business owner.
How do I Obtain an EIN?
After you have filed your business, you can apply for an EIN online through the IRS website, or, for an even more streamlined process, you can use Novo’s free EIN online application feature. This EIN application feature allows you to apply through Novo’s online portal by identifying your entity type and providing relevant personal information such as your mailing and business address. Novo will then submit your application on your behalf to the IRS and assist in the process.
You can also apply through the IRS by fax number at (855) 641-6935 or by mail to this address:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
If you choose to do this, you must file a Form SS-4.
Obtaining an EIN is an essential part of establishing and maintaining most businesses. We recommend that you apply for an EIN as soon as you start planning your business to avoid any issues in the future. Even if an EIN isn’t required, it is generally a smart move to have one.
How Long Does It Take to Get an EIN?
How you apply for your EIN will determine your wait time. Applying for an EIN online is typically the fastest way to obtain your new EIN. When you apply online, you can typically view and print your assigned EIN within hours. If you apply via fax, the process is generally complete within four business days. Applying for an EIN through the mail can take four weeks.
When do I need to change my EIN?
Generally speaking, a business will need a new EIN if its business ownership or structure changes. On the other hand, simply changing your business name does not require you to request a new EIN. The following circumstances within your business entity type will require an EIN change:
When do sole proprietors need a new EIN?
If your business meets any of the following criteria, you will need to obtain a new EIN.
- You are subject to a bankruptcy proceeding.
- You incorporate your business (transition your business from a sole proprietorship to a corporation).
- You take in partners and begin to operate your business as a partnership.
- You purchase or inherit an existing business that you operate as a sole proprietorship.
When do partnerships need a new EIN?
If your business meets any of the following criteria, you will need to obtain a new EIN.
- You incorporate your business (transition your business from a partnership to a corporation).
- One of the partners takes over your partnership and operates it as a sole proprietorship.
- You end an old partnership and begin a new one.
When do corporations need a new EIN?
If your business meets any of the following criteria, you will need to obtain a new EIN.
- Your corporation receives a new corporate charter from the secretary of state.
- You are a subsidiary of a corporation using the parent's EIN, or you become a subsidiary of a corporation.
- You change your business to either a partnership or a sole proprietorship.
- You create a new corporation after a statutory merger (legal merger between two or more companies, where one continues in existence as a legal entity).
When do LLCs need a new EIN?
If your business meets any of the following criteria, you will need to obtain a new EIN.
- A new LLC with more than one owner (Multi-member LLC) is formed under state law.
- A new LLC with one owner (Single Member LLC) is formed under state law and chooses to be taxed as a corporation or an S corporation.
- A new LLC with one owner (Single Member LLC) is formed under state law and has an excise tax filing requirement for tax periods beginning on or after January 1, 2008, or an employment tax filing requirement for wages paid on or after January 1, 2009.
- Exercise tax liabilities
Other unique circumstances may require you to obtain a new EIN depending on your business entity type. You can explore these on the IRS website.
Can I Cancel my EIN Number?
Once an EIN has been assigned to a business entity, it becomes the permanent Federal taxpayer identification number for that entity. An EIN is never reused or reassigned to another business entity, regardless of whether it is ever used to file Federal tax returns. If you ever need to use the EIN for your business at a later date, you still can.
However, if you receive an EIN but decide to close your business – perhaps your new business never fully got off the ground, for example – you can request to close the IRS account associated with your business and cancel your EIN.
Closing your IRS business account requires sending the IRS a letter that includes the complete legal name of your business entity, your EIN, your business address, and the reason you wish to close your account. If you have a copy of the EIN Assignment Notice that was issued when you first received your EIN, include that as well.
Letters should be addressed to either:
Internal Revenue Service
MS 6055
Kansas City, MO 64108
Or
Internal Revenue Service
MS 6273
Ogden, UT 84201
The Takeaway
The application process for an EIN can be smooth sailing, especially with Novo’s seamless EIN application feature. As an entrepreneur, filing for your EIN can only help you be more proactive in taking the initial steps of starting your business. While you'll find answers to most of your questions here or on the IRS website, seek legal advice for confirmation if you have any hesitations.
This page is for informational purposes only and is not intended to be relied upon as legal, financial, or accounting advice. Please consult your own professional if you have any questions.
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