Key Takeaways
Employer Identification Number (EIN)
An Employer Identification Number, or EIN, is a unique nine-digit number issued by the Internal Revenue Service (IRS) to identify a business entity for federal tax purposes. It works much like a Social Security Number does for an individual — it's how the government tracks your business's tax obligations. Businesses use it when filing returns, opening bank accounts, and hiring employees.
Formatted as XX-XXXXXXX, an EIN is also referred to as a Federal Employer Identification Number (FEIN) or Federal Tax Identification Number. It is permanently assigned to the entity and does not expire.
What an EIN Actually Does
Think of an EIN as your business's identity in the eyes of the federal government. Every time your business interacts with the IRS — filing a return, paying employment taxes, or reporting certain transactions — that nine-digit number is what ties the activity back to your entity.
Beyond taxes, the EIN functions as a general-purpose business identifier. Banks require it to open business accounts. Vendors and contractors may request it before they'll work with you. If you plan to hire employees, you'll need one before you can set up payroll or remit payroll taxes.
In short, the EIN creates a formal separation between the business and its owner — which is a foundational concept whether you're operating as a solo freelancer or building a multi-person team. For a broader look at how entity structure shapes your legal identity, see our guide to business structures.
Free
Cost to obtain an EIN from the IRS
The IRS issues EINs at no charge; any third-party fee is for convenience services, not required by law.
9 digits
Length of a standard EIN
Formatted as XX-XXXXXXX, the EIN is assigned once and does not change or expire for the life of the business entity.
Immediate
Online EIN issuance time
The IRS issues EINs instantly when applications are completed through the official IRS online portal during business hours.
When the IRS Requires an EIN
Not every business automatically needs an EIN, but the IRS mandates one in several specific situations:
- You have employees. If your business pays wages, you must have an EIN to handle payroll taxes and W-2 reporting.
- You operate as a corporation or partnership. These entity types are required to obtain an EIN regardless of whether they have employees.
- You file certain federal tax returns. This includes excise tax returns, alcohol, tobacco, and firearms returns, and certain pension plan filings.
- You have a Keogh plan. This is a tax-deferred retirement plan available to self-employed individuals and their employees.
- You withhold taxes on income paid to a non-resident alien.
Even when not strictly required, many sole proprietors and single-member LLCs choose to get one voluntarily. Using an EIN instead of a Social Security Number on invoices and vendor forms significantly reduces your exposure to identity theft.
How to Apply and What to Expect
The IRS provides four ways to apply for an EIN: online, by fax, by mail, or by phone (for international applicants only). The online application — available at IRS.gov — is by far the most efficient option for U.S.-based businesses. The system walks you through a short series of questions about your entity type, ownership structure, and reason for applying, then issues your EIN immediately upon completion.
There is no cost to obtain an EIN. The IRS issues them directly and for free. Be cautious of third-party websites that charge a fee for this service — they are not required, and the IRS warns business owners to be wary of such services.
Once you have your EIN, one of your earliest next steps is typically opening a dedicated business bank account. That process, and why it matters for legal and financial clarity, is covered in our guide to opening a business bank account.
Apply Directly Through IRS.gov
The only legitimate source for a free EIN is the IRS website at IRS.gov. The online application is straightforward and takes roughly 10–15 minutes for most applicants. Avoid third-party services that charge processing fees — they offer no advantage over applying directly and add unnecessary cost.
Common Misunderstandings Worth Clearing Up
First-time business owners often conflate an EIN with other registration requirements. A few distinctions are worth knowing:
- EIN vs. state tax ID
- Some states issue their own tax identification numbers for sales tax, payroll tax, or other state-level obligations. These are separate from your federal EIN and are obtained through state revenue agencies, not the IRS.
- EIN vs. business license
- Operating legally in your city or county typically requires a business license or permit. An EIN is a tax number — it does not authorize you to conduct business in any jurisdiction.
- EIN vs. DUNS number
- A DUNS number is a business credit identifier used by Dun & Bradstreet, sometimes required for government contracting. It is not related to the IRS or federal tax registration.
Building a complete picture of your formation requirements — from entity type to intellectual property considerations — helps you avoid costly oversights. Our overview of intellectual property basics is a useful companion resource for early-stage founders.
This article is for general informational purposes only and does not constitute legal or tax advice. Consult a qualified tax professional or attorney for guidance specific to your business situation.