An Employer Identification Number (EIN), also known as a Federal Tax Identification Number, is a nine-digit number assigned to businesses operating in the United States by the Internal Revenue Service (IRS). The EIN serves as a means of identification for the company and is used for a variety of purposes, such as opening a bank account, applying for a business credit card, and filing tax returns with the IRS on an annual basis.
While most businesses must obtain an EIN, there are a few exceptions. Sole proprietorships with no employees and businesses with annual gross receipts of less than $5,000, for example, are exempt from obtaining an EIN. Furthermore, some non-profit organizations may be exempt from obtaining an EIN if they do not engage in fundraising activities.
Given the numerous advantages of having an EIN, it is generally recommended that all businesses obtain one. The EIN enables the company, among other things, to open a bank account, apply for a business credit card, and file tax returns. Furthermore, the EIN serves as a means of identification for the company, aiding in its credibility and legitimacy.
It is important to note that an EIN should not be confused with a 501(c)(3) number, which is a tax-exempt non-profit organization status granted by the IRS. Obtaining 501(c)(3) status necessitates a separate application and is unrelated to obtaining an EIN.
Finally, an EIN is a nine-digit number assigned by the IRS to businesses operating in the United States. An EIN is required for most businesses, and there are several advantages to having one. If you are starting or already have a business, it is critical to understand the significance of having an EIN and whether you are required to obtain one.
