Difference Between a Business License & a Tax ID

In the United States, each person, business, charity, organization or other entity is assigned a unique identification number. For individuals, this number is the Social Security number; for businesses, it is the employer ID number.

Employer ID Number

An employer ID number is assigned by the IRS, a state, a city or a county for tax-related purposes. Each legitimate business, charity and organization in the US has a unique tax ID number.

Business License

A business license grants a business the privilege to operate in a city, county or state. They also are used in regulating the location for certain types of businesses.

Occupational Licenses

Additional licenses or occupational permits may be required for special fields like accountants, real estate agents and engineers.

Considerations

Some types of businesses must have licenses on all levels of government. Each business location usually requires an individual license.

Individuals

For individuals, the Social Security mumber is the tax identification number.

Warning

Failure to file for the proper business license can result in fines, penalties, legal actions and possible business closure. Research the legal requirements for licensing before opening a business.

References

• Businessdictionary.com: Social Security Number
• Businessdictionary.com: Employer ID Number
• Entrepreneur.com: Business License

Resources

• Small Business Advisor Website
• IRS.Tax Information for Businesses
• Tax Foundation