An Employer Identification Number (EIN) is a federal tax ID for a business, similar in function to a Social Security Number but for the business entity rather than an individual.
When you actually need one
- You've formed an LLC or corporation — most banks require an EIN (not just your SSN) to open a business bank account for a registered entity, even a single-member LLC.
- You plan to hire employees — an EIN is required once you have payroll, even for a single-member LLC.
- A marketplace's seller application requires one — some marketplace account types or business verification processes ask for an EIN rather than accepting an SSN, particularly for a registered business entity.
- You want to avoid giving out your SSN — even a sole proprietor can apply for an EIN voluntarily specifically to use it on tax forms, vendor/supplier paperwork, and marketplace forms instead of an SSN.
When you can operate without one
A sole proprietor with no employees can generally use their SSN for tax filing and many marketplace applications instead of an EIN — it's optional in that scenario, not prohibited. Many sellers still choose to get one anyway for the privacy and business-separation benefits described above, since the application is free and takes minutes.
How to get one
In the United States, an EIN is issued free of charge by the IRS, and the fastest method is the IRS's own online application, which typically issues the number immediately upon completion for eligible applicants. Be cautious of third-party sites that charge a fee for this — the EIN application itself is always free directly through the IRS.
What you'll need to apply
The responsible party's SSN or existing taxpayer ID, the legal business name and structure (matching what you filed if you've formed an LLC), and the business's mailing address. If you've just formed an LLC, apply for the EIN only after the LLC formation is complete, since the EIN application asks for your formation details.
A simple decision guide
| Situation | Do you need an EIN? |
|---|---|
| Sole proprietor, no employees, comfortable using SSN | Optional |
| Sole proprietor, want to avoid using SSN on business paperwork | Optional but commonly recommended |
| Formed an LLC or corporation | Required by most banks to open a business account, and generally recommended regardless |
| Planning to hire employees | Required |
| Marketplace specifically requests one for account verification | Required for that application |
Common mistakes
- Paying a third-party service for something the IRS provides free.
- Applying for an EIN before finishing LLC formation, then having to correct the entity information afterward.
- Assuming a sole proprietor can never need one — a marketplace's specific verification requirements can require it even without an LLC.
After you have your EIN
Keep the confirmation document (the IRS's EIN confirmation letter or notice) somewhere secure and easy to retrieve — banks and marketplaces frequently ask for it during account setup or periodic re-verification, and it's genuinely inconvenient to have to prove your EIN after the fact if you've lost the original confirmation.