EIN (Employer Identification Number)

Your EIN is the nine-digit federal tax ID the IRS assigns to your business. It works the way a Social Security Number works for individuals: a unique identifier that appears on your tax filings, payroll tax accounts, and employer forms. If you have employees, you need one before your first payroll run. If you're a sole proprietor without employees, you may still want one. Either way, it's one of the first things a new business owner sets up.

What an EIN identifies

EIN stands for Employer Identification Number. You'll also see it called a Federal Employer Identification Number (FEIN) or Federal Tax Identification Number — all three names refer to the same number.

The IRS assigns an EIN in the format XX-XXXXXXX: nine digits that identify your business entity for federal tax purposes. Your EIN appears on employment tax filings, payroll tax deposits, Form 941, Forms W-2, and any account you open with a payroll provider.

The EIN belongs to the entity, not the owner. If you restructure your business or form a new legal entity, you'll generally need a new EIN. EINs do not expire and are not reassigned once issued.

Source: IRS.

Who needs an EIN

Required: If your business has employees — even one — you need an EIN before you run your first payroll. The requirement also applies to corporations, partnerships, multi-member LLCs, and businesses that file excise taxes or withhold taxes on income paid to nonresident aliens.

Common but not legally required: Sole proprietors without employees aren't required to have an EIN. You can use your Social Security Number instead. But many sole proprietors choose to get one to protect their personal SSN, open a business bank account, or apply for business credit.

LLC owners: Whether your LLC needs an EIN depends on how it's taxed and whether it has employees. Single-member LLCs treated as disregarded entities with no employees may use the owner's SSN; multi-member LLCs and those with employees need an EIN.

EIN vs. other business identification numbers

Three comparisons come up most often.

EIN vs. SSN: Your EIN identifies your business entity; your SSN identifies you as an individual. They serve different purposes and don't replace each other. Having an EIN doesn't affect your SSN.

EIN vs. state employer account number: Your EIN is federal. Most states also issue their own employer account numbers for state income tax withholding and state unemployment insurance (SUI). Those are separate numbers, obtained through separate applications. Running payroll typically requires both.

EIN vs. business license or DUNS number: These are different identifiers used in different contexts. Your EIN is for federal tax identification; a business license authorizes you to operate in your jurisdiction; a DUNS number is a nine-digit identifier used by Dun & Bradstreet for business credit and supplier databases. None of these replace each other.

EIN and your payroll setup

You need your EIN before you can run payroll. It's required to open an employer tax account with the IRS, file your quarterly employment tax return (Form 941), and issue W-2s to your employees at year-end. It's also required to set up an account with any payroll provider.

When you set up payroll with SurePayroll® By Paychex, you enter your EIN during account setup. SurePayroll uses it to file employment taxes on your behalf. The EIN is yours — you obtain it from the IRS before setup, and SurePayroll doesn't apply for or obtain EINs on your behalf.

If you don't yet have an EIN, you can apply at no cost through IRS.gov. For the full steps, see how to get an EIN.

Your EIN is one of the first things you'll need when you hire employees — or prepare to. It's free to obtain from the IRS, it stays with your business, and it's required before your first payroll run. Ready to set up payroll? Explore SurePayroll's small business payroll options or learn how to do payroll end to end.