Who needs an EIN and what is it for?

September 21, 2025

By Nadia Cabrera-Mazzeo, Esq.

Short Answer: Any business can benefit from having an EIN, which is like a social security number for businesses.

What is an EIN?

An EIN is a federal tax ID for businesses and functions in a similar way as social security numbers for individuals. EIN stands for employer identification number but you don’t have to have employees to get one. Sometimes it’s referred to as an FEIN with the “F” standing for “federal.” You get an EIN by filling out an application with the IRS.

What is an EIN?

An EIN is required for the following:

yellow dot   Anyone who has employees;

yellow dot   LLCs, corporations, and partnerships;

yellow dot   Tax-exempts organizations;

yellow dot   People responsible for paying employment, tobacco, alcohol, firearms, or excise taxes;

yellow dot   People responsible for withholding non-wage income taxes for folks classified as nonresident aliens;

yellow dot   People who operate a trust, estate, retire plan, farmer’s co-op, or real estate mortgage investment conduit (some exceptions apply).

yellow dot   An EIN is not required for most sole proprietors, but it’s a good idea for sole proprietors to have one.

Why should sole proprietors get an EIN?

Sole proprietors can benefit from having an EIN in several ways:

1. Privacy and security—a social security number is very sensitive information that should be kept as private as possible to avoid identity theft and other breaches of privacy. With an EIN, sole proprietors can keep their socials private and use the EIN for business transactions instead.

2. Easier to open a business bank account—some banks will not open a dedicated business bank account without an EIN. Keeping personal and business finances separate is essential for legitimate business operations regardless of the legal structure of that business.

3. Adds legitimacy and credibility—having an ID number that’s specific to the business adds a level of legitimacy to the sole proprietor’s status as a businessperson and independent contractor.

Why should sole proprietors get an EIN?

Ways to use an EIN outside of taxes:

An EIN is extremely useful outside the tax world. It’s a vehicle through which your business can have a life of its own. Anything you would normally use a social security number for, you can use your business’s EIN for when acting on behalf of the business. For LLCs and corporations, this is an essential part of the separation between your business and personal identity that helps keep a strong liability shield for business debts.

For sole proprietors, there is still no liability protection for business debts as there is no legal difference between the business and the individual owner, but the benefits described above still apply. Here are some examples of non-tax ways to use an EIN:

yellow dot   Opening a business bank account;

yellow dot   Applying for a business loan;

yellow dot   Getting a business credit card;

yellow dot   Applying for business permits and licenses.

How to get an EIN

Getting an EIN is generally fast and easy. The simplest way to do it is by filling out the online application on the IRS website.

If I get an EIN as a sole proprietor and then form an LLC or corporation, can I still use the same EIN?

Unfortunately, no. Anytime your business’s structure or ownership changes in a major way, you will need to get a new EIN.

I changed the name of my business, can I use the same EIN?

Yes, simply changing the name of your business is usually not considered a major structural or ownership change that would require getting a new EIN.

I’m planning on starting an LLC or corporation, when should I get the EIN?

You should get the EIN after you officially register the business entity with the state, that is, after you file the articles of organization/ incorporation.

If you’d like help getting your legal ducks in a row, schedule a consultation with our attorney when you’re ready.

Law office of Nadia Cabrera-Mazzeo, Esq.

Small business and contracts lawyer

Based in Taos, serving clients throughout New Mexico

505 427 2025

nadia@honestcontracts.com

The information on this website is not legal advice and does not create an attorney-client relationship. The rates and fees listed on this website may not be the most up to date.