Do You Need an Employer Identification Number (EIN)?

If you’re starting a new business or expanding your current solopreneur work, it’s important to figure out the legal steps you need to take to make your company legitimate. An employer identification number (or EIN) is one such legal step.

But believe it or not, you don’t always need an EIN to legally run your business. Let’s take a closer look at what EINs are and who needs them.

Short for employer identification number, an EIN is a nine-digit number assigned to your business by the Internal Revenue Service (IRS). It’s unique to your business, and it can be used to identify your business on legal paperwork like credit card and loan applications, as well as on your taxes. It is kind of like a social security number but for your business, not your person.

If you employ more than just yourself, you are required to deposit and report your employees’ income taxes. That means that you’ll need to file an employment tax form. The IRS uses your employment tax forms to determine who’s paying your employees and how taxes were withheld from each employee’s paycheck. The IRS will then use that information to determine whether you (the employer) deposited those withholdings with the IRS correctly. This is why it is very important to know how to file your taxes, you might just need an EIN. 

Long story short: if you have other people working for you, you’ll need an EIN.

This is where things get sticky. EINs are also required for specific tax returns unique to certain kinds of businesses like those that sell archery products, manufacture fishing or run a sports betting business (which also might mean you want a crash course in website building or dropshipping). It does not matter how many people you employ. If you are participating in these industries, you must have an EIN. 

Additionally, the government charges extra taxes on some items, so if you sell any of these items, the IRS will also need you to file a special tax return (which requires an EIN):

• Alcohol
• Gasoline
• Coal
• Firearms
• Aircrafts
• Tobacco

To get a 401(k) or Keogh retirement plan (that’s a special retirement plan specifically for self-employed people), you’ll need to have an employer identification number. Otherwise, your retirement plan provider won’t be able to verify that you’re employed.

Much like above where we listed the different industries and products that make it necessary for your business to have an EIN, there are also organization types that require you to use your EIN while working with them. These include: 

• Estates
• Real estate mortgage investment conduits
• Nonprofit organizations
• Farmers cooperatives
• Plan administrators

You may also need an EIN if you do business with a trust, though certain types of trusts are exempt from this rule.

If you are running a solopreneur business, aren’t selling items with extra taxes levied against them, and do business directly with your consumers, then good news: you don’t need an EIN.

But . . . it never hurts to be prepared and get an EIN regardless. It doesn’t cost anything but time, and it’ll ensure you’ve got your ducks in a row if you ever stumble into a business situation where an EIN is necessary.

If you’re a solopreneur running a business without employees, there’s a good chance you don’t need an employer identification number. However, we recommend checking out the IRS website for the most current information on EIN requirements.

We also want to point out that even if you think you don’t need an EIN, applying for an EIN costs you literally nothing but a few minutes of your time. It may be well worth the peace of mind, knowing you’ve legally covered your bases—just in case you wind up needing an EIN.

An EIN may not be necessary to apply for a business credit card, but what’s the alternative? Find out more in our guide to business credit cards versus personal credit cards.

Short answer: maybe.

If your business’s only employee is yourself, there’s a good chance you won’t need an EIN. However, even solopreneurs will need an EIN if they sell excise items (special, extra-taxable items like gasoline or tobacco, for instance) or they do business with trusts and other types of organizations. You’ll also need an EIN to get yourself a retirement savings plan.

Not necessarily. You can register for an LLC as a solopreneur, so it’s totally possible to run an LLC without needing an employer identification number. But again, you’ll need to get that EIN if you plan to sell excise items, do business with certain types of organizations, or get yourself a retirement plan.

If you don’t have an EIN, you can file self-employment taxes using the IRS’s 1040 or 1040-ES form. In addition, you may need to file a Schedule C or Schedule C-EZ form (depending on your business). These forms do not require employer identification numbers for solo businesses, as long as you don’t meet any of the other qualifications listed above.

Yes, you can apply for a business credit card without an EIN. Instead, you’ll use your personal social security number, and the issuing institution will run a check on your personal credit (rather than your business credit) to determine your eligibility.

If you never use your EIN, then it’s no harm, no foul. An EIN doesn’t cost you anything, and anyone telling you otherwise is taking you for a ride. Your EIN will stay permanently assigned to your business no matter what, so you don’t have to worry about losing it. And it never hurts to have an EIN just in case you do need to use it at some point in the future.