What is an EIN?

An Employer Identification Number (“EIN”) is a number issued by the federal government to all corporations, and it acts as a sort of social security number for companies.  It is how the government identifies your company—it will be put on all records sent to the federal and state governments during the whole life of your business.

It is issued to companies regardless of their tax status—S-corporations and C-corporations, for profits and non-profit corporations all must have one to operate.  Essentially, its role is to help the government keep track of which corporation is which, though for a business owner it is a requirement needed to begin properly operating a company and accounting for it—without it most states will not even recognize the company, and the IRS will not approve S-corporation or Non-profit status status.  Moreover, most U.S. banks require an EIN to open an account in the businesses name, and to obtain a business license the company must have an EIN.  In short, it is an essential part of creating a business.

While a sole proprietor with no employees generally can use their social security number as their tax identification number, an EIN is required on a practical and legal level for all other business types—and indeed most of the early steps you need to make to begin a company cannot be done without one.  Potential business owners should consider obtaining an EIN at the time the company is created, or soon thereafter, as a required step for conducting business and managing it properly.