Do I Need a Tax ID Number for a New Business?
A Tax ID Number (TIN), or Employer Identification Number (EIN) is a nine-digit number in the form xx-xxxxxxx that the Internal Revenue Service (IRS) assigns to businesses. In general, you'll be required to get an EIN from the IRS whenever you start a new business. However, there are some exceptions.
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Definition
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A TIN or EIN is a number that identifies your business as a unique entity. It's primarily used for taxation purposes: to keep track of your tax returns and match the reported amounts against amounts reported by your customers, clients, employees, vendors and other business partners. The EIN is permanently attached to your business and can be used to open business bank and brokerage accounts, apply for business licenses and apply for business credit.
When You Need an EIN
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If you are a new business with employees, you need to get an EIN. If you are a corporation or partnership, you also need to obtain an EIN -- even if you don't have employees. The IRS also requires you to get an EIN if: you file employment, excise, or Alcohol, Tobacco and Firearms tax returns; if you withhold income taxes paid to a nonresident alien (other than wages); if you have a Keogh plan or if you are involved with trusts, estates, real-estate mortgage investment conduits, plan administrators, farmer's cooperatives or nonprofit organizations.
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When You Don't Need an EIN
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You don't need to get an EIN if you operate your business as a sole proprietorship. This applies even if your company is a single member limited liability company; the IRS does not officially recognize limited liability companies as a taxable entity. You can elect to be taxed as a sole proprietor and as long as your business does not fall under any of the requirements listed in Section 2, you won't need an EIN.
Multiple Businesses
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If you are a business owner already and you acquire another new business, you may not need to get an EIN. In general, you can operate multiple businesses as a sole proprietor using the same taxpayer identification number. For example, if you own Joes' Plumber Supply Shop and start an online business called Jim's Plumbing Supplies, you won't need to get an EIN as long as you do not fall under any of the situations listed in Section 2.
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