A Simple Guide to EINs for Business Owners and Individuals
Most people are comfortable with Social Security Numbers (SSN). You deal with your own or your families SSN’s regularly.
When it comes to EIN’s – Employer Identification Number – they are typically unfamiliar territory.
Most people think about them only in the context of a business. So if you don’t have a business, you think you don’t need one.
However, if you have a business, you don’t necessarily need an EIN. And, if you don’t have a business, you might still need an EIN!
What is an EIN (Employer Identification Number)
An EIN is a tax ID issued by the Internal Revenue Service (IRS) for the purpose of identifying an entity. It’s like the SSN for the entity.
While you only have one SSN, you can have multiple EIN’s for different purposes.
You may have an EIN for:
- Yourself (personally)
- A business or multiple businesses
- A retirement plan
- A trust
How to Get an EIN (Quick and Simple)
Obtaining an EIN is fairly straight forward and, in most cases, very quick.
Step 1: Apply Online with the IRS
Go directly through the IRS website. It’s free. Get an employer identification number | Internal Revenue Service
You can submit an application via fax or mail but this will take much longer.
Step 2: Choose What You’re Creating
You’ll select:
- Business (LLC, sole prop, etc.)
- Trust
- Retirement plan
Step 3: Enter Basic Info
- Name
- Responsible party (you)
- Address
- Purpose
Step 4: Get It Instantly
You’ll receive your EIN immediately and can download the confirmation letter.
Some Cases Where it Takes Longer
- You submit the application via fax or mail.
- You don’t have a SSN
- Complex Entities or Mismatched Data
- You’ve tried to open too many EIN’s in a short period of time.
Common Uses for EINs
EIN for a Business
You need a business EIN if:
- You have employees
- You operate as an LLC, partnership, or corporation
- You want a business bank account
- You don’t want to use your SSN on forms
You might still get one even if:
- You’re a sole proprietor with no employees
- You just want cleaner separation and privacy
EIN for a Solo 401(k)
If you open a Solo 401k, it will ask for an EIN number. This is not the same number as your business EIN number, if you have one.
Your Solo 401k is legally separate from your business so it requires its own EIN.
When you need a 401(k) EIN:
- Opening a solo 401(k) account (most custodians require it)
- Filing Form 5500-EZ (once plan assets exceed $250,000)
- Keeping reporting clean and separate
EIN for a Trust
Trusts can be fairly simple or quite complex. Depending on what type of trust you have, you may or may not need an EIN for that trust.
If you work with an attorney to craft the trust, they will be able to answer if your particular trust needs one.
Most trusts are revocable and typically do not require a separate EIN until the grantors pass away.
However, if a trust is irrevocable or is a more complex trust, it may very well need an EIN.