Key Takeaways

  • A business Social Security number is typically referred to as a Tax Identification Number (TIN) or an Employer Identification Number (EIN) for businesses.
  • Sole proprietors can often use their Social Security number (SSN), but obtaining an EIN can offer better financial and legal separation.
  • Partnerships, LLCs, and Corporations require an EIN to legally operate.
  • An EIN is necessary for hiring employees, business banking, and tax reporting.
  • ITINs (Individual Taxpayer Identification Numbers) are available for foreign entrepreneurs without SSNs.
  • Businesses may need a state tax ID in addition to an EIN, depending on state tax requirements.
  • Business credit is often tied to an EIN but may also require an SSN for personal guarantees.
  • UpCounsel provides access to experienced business attorneys for tax and legal concerns.

A business Social Security number is used as a way to identify and set a business apart from all others, much the same way a Social Security number is a unique identifier for each person. A tax identification number or TIN is the business version of a Social Security number, and small business owners often get TINs so they can conduct business and keep their personal finances separate from business finances. The way you register your business with the state and whether you hire employees can help you decide whether you need a TIN.

Information on TINs

A TIN is made up of nine digits that the government uses to identify a person or business.

  • Individuals use Social Security numbers as their TINs.
  • For a business entity, the name for a TIN is the employer identification number. It can be called an EIN or TIN.
  • A Social Security number is always a type of tax ID number, but tax ID numbers aren't always Social Security numbers.

Types of Business Tax Identification Numbers

There are several types of tax identification numbers (TINs) that businesses may use, depending on their structure and tax needs:

  • Social Security Number (SSN) – Used by sole proprietors who do not have employees.
  • Employer Identification Number (EIN) – Used by businesses with employees, partnerships, LLCs, and corporations.
  • Individual Taxpayer Identification Number (ITIN) – Issued to foreign entrepreneurs who are not eligible for an SSN.
  • State Tax Identification Number – Required by businesses for state tax filings, such as sales tax and employment taxes.

Why Tax ID Numbers Exist

The biggest reason tax ID numbers exist is so business owners can pay tax on income that businesses earn. The tax ID number or TIN has to be included on all tax forms that the owner submits for the business. Banks also require tax ID numbers when opening business accounts. Also, suppliers or customers will sometimes ask for a business's tax ID number when setting up an account or if they need to write a check to pay the business.

When Does a Business Need an EIN?

A business must obtain an EIN in several key situations, including:

  • Hiring employees (to file payroll taxes).
  • Operating as a partnership, LLC, or corporation.
  • Applying for business credit, loans, or corporate bank accounts.
  • Filing excise taxes or retirement plan taxes.
  • Running a nonprofit, trust, or estate.

Even sole proprietors may choose to apply for an EIN to avoid using their SSN on business documents and applications.

Tax IDs for Different Business Types

For a sole proprietorship, a separate tax identification number isn't required for tax purposes. This is because the sole proprietor's Social Security number is the same thing as the business's ID for tax purposes. No separate paperwork needs to be filed for this. The coverage is automatic since the owner and the business are technically the same entity.

Other types of businesses, such as partnerships or corporations, have to apply for a separate tax ID number if they want to conduct business. Because two or more people are involved in a partnership, a partnership can't use just one person's Social Security number. A corporation, because it's a unique entity, is already separate from the individual owner or owners and needs its own TIN number.

How to Apply for an EIN

Applying for an EIN is a straightforward process. Here’s how:

  1. Online (Recommended) – The fastest method, available via the IRS website.
  2. By Mail or Fax – Fill out Form SS-4 and send it to the IRS.
  3. By Phone (International Applicants) – If applying from outside the U.S., you can apply by calling the IRS.

There is no fee to apply for an EIN, and most businesses receive their EIN immediately when applying online.

EINs

A separate tax ID number isn't required for a sole proprietor to do business unless that sole proprietor wants to hire employees. Then an EIN is required. The EIN is necessary for tax forms when paying employees' taxes on behalf of a sole proprietorship's workers. When the W-2 is prepared for each employee, the EIN is shown on that form. An EIN is also required for certain small business owners who are affiliated with organizations such as nonprofits, farmers cooperatives, and even some trusts.

Differences Between an EIN, SSN, and ITIN

  • EIN: Assigned to businesses for tax and banking purposes.
  • SSN: Used by individuals, but sole proprietors may use it instead of an EIN.
  • ITIN: Used by foreign individuals who do not qualify for an SSN but need to pay U.S. taxes.

For privacy and fraud protection, business owners are encouraged to use an EIN rather than an SSN when possible.

Tax IDs for Acquiring Business Credit

Credit issuers often require both a TIN and a Social Security number in order to offer credit. Getting a credit card for your business without sharing your Social Security number with the card issuer isn't easy. If you can't show your Social Security number or don't want to share it when applying for a business credit card, the process is to:

  • Fill out the application to get an individual taxpayer identification number, which is also called an ITIN.
  • After receiving your ITIN, apply for an employer identification number. This is the EIN.
  • Seek out business credit card issuers, such as one that typically issues corporate credit cards, and then apply with your EIN instead of your Social Security number.

In this case, your EIN functions as a Social Security number for your business. You may run into a problem trying to get credit cards this way, though, because credit card issuers tend to hesitate to issue business credit cards based solely on an EIN. When you apply for a credit card using only an EIN, the issuer can't run a personal credit check on you because you haven't provided your Social Security number. Using this technique also prevents the credit card issuer from requiring that you personally guarantee your business credit card spending.

Building Business Credit with an EIN

Using an EIN can help establish business credit independent of personal credit. To build business credit:

  1. Register your business with an EIN and establish a business bank account.
  2. Apply for a D-U-N-S Number, used to track business credit.
  3. Use business credit cards that report to business credit agencies.
  4. Ensure timely payments to suppliers and lenders.

Some lenders may still require a personal guarantee, but maintaining business credit with an EIN can reduce reliance on personal credit.

Frequently Asked Questions

  1. Can I use my SSN instead of an EIN for my business?
    Yes, sole proprietors without employees can use their SSN, but getting an EIN offers better privacy and security when working with banks and vendors.
  2. How long does it take to get an EIN?
    If applying online, an EIN is issued immediately. Mail applications take up to four weeks, while faxed applications take about four business days.
  3. Do I need a state tax ID if I have an EIN?
    Possibly. Some states require a state tax ID for businesses collecting sales tax or hiring employees. Check with your state’s tax agency.
  4. Is an EIN required for a single-member LLC?
    Not always. If a single-member LLC has no employees and does not file excise taxes, it can use the owner’s SSN. However, an EIN is required if the LLC elects to be taxed as a corporation.
  5. Can I apply for an EIN if I’m not a U.S. citizen?
    Yes. Non-U.S. citizens can apply for an EIN, but they may need an ITIN if they do not qualify for an SSN.

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