The Employer Identification Number (EIN): Your Business’s Free and Essential Federal Tax ID
Why important for US business owners
If you are a US freelancer, consultant, LLC owner, or small business founder, you’re busy building your empire—creating products, landing clients, and perhaps even hiring your first employee. Amidst all this growth, there is one crucial piece of paperwork that often goes overlooked until the last minute: obtaining an Employer Identification Number (EIN).
Starting a business in 2025 means navigating regulations, taxes, and government processes. If you are still relying solely on your Social Security Number (SSN) for business transactions, you might be unintentionally mixing your personal identity with your business operations. While this is acceptable for some sole proprietors with no employees, an EIN becomes mandatory for most growing entities and offers significant benefits even when it is optional.
An EIN establishes your business as a federally recognized tax entity in the eyes of the US federal government. It is the key that opens the door to essential activities like opening a business bank account, hiring staff, and achieving legal compliance.
The great news? Obtaining this critical number is quick, easy, and, most importantly, completely free when done directly through the Internal Revenue Service (IRS). This guide breaks down exactly what an EIN is, why you need it, and how to apply for it efficiently and without paying unnecessary third-party fees.
What is an EIN with simple definition
An Employer Identification Number (EIN), often referred to as a Federal Tax Identification Number, is a nine-digit number assigned by the Internal Revenue Service (IRS).
You can think of the EIN as being the business equivalent of an individual’s Social Security Number (SSN). It functions as a tax ID number, and its primary role is to allow the IRS to track your company for federal tax purposes.
It is important to note that the EIN is not the same as a state tax ID, which is used for state-level taxes and may be required by certain states.
Why it matters
For US entrepreneurs, obtaining an EIN is often a foundational step that moves the business from a hobby to a recognized, compliant entity.
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| Benefit | Why It Matters For US Businesses |
|---|---|
| Federal Recognition & Compliance | The EIN establishes your company as a tax-recognized entity. It is required for filing federal taxes for your business. Understanding how to obtain, use, and update your EIN sets you up for smooth operations and compliance with IRS requirements. |
| Hiring Employees | You are required to have an EIN if you have—or plan to have—employees. The number is essential for paying or withholding employment taxes and filing the associated necessary paperwork. |
| Banking and Finance | An EIN is usually required when you need to open a business bank account. Many financial institutions mandate this. Using an EIN and separate accounts helps legitimize your business. |
| Increased Privacy & Security | If you are a sole proprietor with no employees, you can technically use your SSN instead of an EIN. However, an EIN offers greater privacy by allowing you to share your business tax ID instead of your personal SSN with vendors, clients, and banks. |
| Required Business Structures | If you operate as an LLC, partnership, or corporation, an EIN is usually required by the IRS. Forming a new LLC will require a new EIN. |
Step-by-step guide: Apply for Your Free EIN Directly Through the IRS
The process of obtaining an EIN is relatively fast and straightforward. It is also completely free if you apply directly through the IRS website.
The online application is the simplest and fastest method, allowing you to receive your EIN immediately.
Crucial Prerequisites:
- You must have a legal residence in the United States, and the business must be physically located within the US or its territories.
- You must name a responsible party (the individual who manages the daily operations and can access the funds).
- The responsible party must have a valid SSN, Individual Taxpayer Identification Number (ITIN), or separate existing EIN.
- Your business must already be legally formed (e.g., you have established your LLC with your state).
Step-by-Step Guide (Online Application):
- Go to the Official IRS EIN Assistant: Navigate directly to the IRS website at irs.gov and find the "Apply for an Employer Identification Number (EIN) Online" section. Be certain you are on the irs.gov website to avoid third-party fees.
- Check Availability Hours: The online application service is only available Monday through Friday, between 7:00 a.m. and 10:00 p.m. Eastern Time. Attempting to apply outside of these hours will not work.
- Begin the Application: Select "Begin Application Now". Note that you must complete the application in a single session, as it will time out after 15 minutes of inactivity.
- Choose the Type of Entity: Select the legal structure of your business (e.g., LLC, Sole Proprietor, Corporation). This choice determines the necessary subsequent details.
- Provide Business Details: Fill in the complete legal name of your business (including any trade names or DBA names) and your business's physical address. Note: The address provided must be a US address and cannot be a P.O. box.
- Designate the Responsible Party: List the responsible party (usually the owner) and provide their valid SSN. The system will verify the SSN before proceeding.
- State the Reason for Application: Select the reason for applying, such as "Starting a new business" or "Hiring employees".
- Describe Business Activities: Select the category that best describes your business’s primary activities (e.g., Consulting, Manufacturing, Real Estate).
- Select Delivery Method: Choose how you would like to receive your confirmation letter. Selecting online allows you to receive and print your EIN confirmation letter immediately.
- Submit and Download: Double-check your information, submit your application, and download your EIN confirmation letter (CP 575).
Alternative Application Methods: If you prefer not to apply online, you can submit Form SS-4 via fax or mail:
- Fax: Fax Form SS-4 to the IRS (within the US: 859-669-5760). You should receive your EIN by fax within four business days.
- Mail: Mail Form SS-4 to the IRS (Attn: EIN Operation, Cincinnati, OH 45999). Receiving your EIN via mail takes approximately four to six weeks.
- Phone (International Only): International applicants who cannot file online, fax, or mail can call the IRS (267-941-1099).
Real US Business Examples
The Scaling LLC Founder (Banking and Structure)
A small business founder operating as a multi-member LLC quickly realized that they were required to have an EIN because their business structure was an LLC. Furthermore, when attempting to open a dedicated business checking account at their preferred financial institution, the bank required the nine-digit EIN to process the application. Obtaining the EIN was the necessary step to separate the business's finances and establish banking operations.
The Freelancer Seeking Privacy (Sole Proprietor)
A sole proprietor running a digital marketing consultancy did not have employees, meaning they technically could use their personal SSN for business tax filing. However, to work with several large corporate vendors who required a tax ID for payment processing, the consultant decided to apply for an EIN. This strategic move allowed the freelancer to provide the EIN instead of their SSN to third parties, adding a layer of privacy and security to their personal identity.
The Entrepreneur Hiring Staff (Compliance)
A tech entrepreneur secured funding and decided to hire two full-time employees immediately. Because the business planned to have employees and would be required to pay and withhold employment taxes (W2s), obtaining an EIN was mandatory. The EIN was required to set up payroll systems and ensure legal compliance with IRS employment tax filing.
Common Mistakes to Avoid
The EIN process is simple, but errors can delay operations or cost you money unnecessarily.
- Paying for a Free Service: The single most common mistake is applying for an EIN through a third-party website that charges a fee. Applying for an EIN directly through the IRS is completely free. These paid services use the same free IRS form.
- Applying Outside of Operating Hours: The IRS online EIN Assistant is only available Monday through Friday, 7:00 a.m. to 10:00 p.m. Eastern Time. Trying to apply late on a Saturday night will not work and only causes frustration.
- Applying Before Entity Formation: The application requires you to specify the legal structure of your business (LLC, Corporation, etc.). You should ensure your legal structure is established with your state before attempting to obtain the EIN, otherwise, you may select the wrong entity type.
- Co-mingling Addresses: While you can use a physical mailbox service for your business address, you cannot use a traditional P.O. box. If you are using your home address but wish to receive mail elsewhere, you can specify a different mailing address within the application, but the physical location must be valid.
- Forgetting the CP-575 Letter: Once issued, the CP-575 letter serves as official proof of your EIN, business name, and filing address. It is a crucial document, and losing it requires calling the IRS to request a 147c letter for verification. Always download and securely save this initial confirmation.
Best Tools & Resources
Leveraging official, government resources ensures accuracy and compliance when dealing with your federal tax ID.
| Resource/Agency | Purpose for US Small Businesses/Freelancers | External Reference (Conceptual) |
|---|---|---|
| Internal Revenue Service (IRS) | The only official source for applying for a free EIN. Provides the online EIN Assistant and forms (Form SS-4). | irs.gov |
| Form SS-4 | The paper application form used to apply for an EIN via fax or mail. It includes the same necessary business details as the online application. | irs.gov (Search for "SS-4") |
| IRS Business and Specialty Tax Line | Use this number (1-800-829-4933) if you have not received your EIN within the normal processing timeframe for faxed or mailed requests. | 1-800-829-4933 |
| IRS Form 8822-B | Required to update your EIN record if your business’s mailing address, location, or responsible party changes. Changes to the responsible party must be reported within 60 days. | irs.gov (Search for "Form 8822-B") |
| Small Business Administration (SBA) | Provides general guidance on business setup and compliance (useful for finding state registration info which is needed before applying for an EIN). | sba.gov |
Comparison table (EIN Application Options)
Entrepreneurs have four ways to apply for an EIN, but the online method is almost always preferred due to speed and convenience.
| Application Method | Required Form | Processing Time | Available Hours | Key Considerations |
|---|---|---|---|---|
| Online | None (Web Form) | Immediate (Minutes) | Mon–Fri, 7 a.m. to 10 p.m. ET | Simplest, fastest, and free. Must complete in one session. Only available for businesses located within the US. |
| Fax | Form SS-4 | Four business days | 24 hours a day, 7 days a week (Fax line) | You must provide a return fax number to receive the EIN. Slower than online, faster than mail. |
| Form SS-4 | Four to six weeks | N/A | Slowest method. If you need to file a return before receiving the EIN, write "Applied For". | |
| Phone | Form SS-4 (for reference) | Immediate (Over the phone) | Mon–Fri, 6 a.m. to 11 p.m. ET | Strictly for international applicants who cannot file online, fax, or mail. |
FAQs
Q: Is it true that getting an EIN is completely free?
A: Yes. Applying for an EIN directly through the official IRS website or via mail/fax is completely free. You should be cautious of third-party websites that charge fees to file the same free form on your behalf.
Q: How long does it take to get an EIN?
A: If you apply online using the IRS EIN Assistant, you will receive your EIN immediately. If you apply by fax (Form SS-4), it takes about four business days. If you mail Form SS-4, it can take four to six weeks.
Q: Can I use my SSN instead of an EIN?
A: If you are a sole proprietor and you do not have employees, you can generally use your SSN instead of an EIN. However, obtaining an EIN is still highly recommended for privacy and because it is often required by banks and vendors.
Q: I lost my CP-575 confirmation letter. What should I do?
A: The CP-575 notice is crucial documentation. If you lose it, you can call the IRS to request a 147c letter, which verifies your previously issued EIN, name, and filing address.
Q: Do I need a new EIN if I change my business address?
A: No, generally not. If your mailing address or physical business location changes (and your legal structure remains the same), you only need to update your record by filing Form 8822-B with the IRS.
Q: Does my LLC need a new EIN if I change its structure?
A: Yes. If your business structure changes—for example, changing from an LLC to a corporation, or if a new entity forms after a merger or acquisition—you will need to apply for a new EIN.
Q: Do I need an EIN if I am an LLC but have no employees?
A: Yes, generally. While a single-member LLC is taxed as a disregarded entity (like a sole proprietor) by default, the LLC structure itself requires an EIN, especially for banking purposes.
Q: Why can’t I apply for an EIN online on weekends?
A: The IRS online application system has specific hours of operation: Monday through Friday, 7 a.m. to 10 p.m. Eastern Time. If you try to apply outside of these hours, the system will not work.
Q: What is a "responsible party"?
A: The responsible party is the individual who manages the business’s daily operations and can access its funds. This individual must have a valid SSN, ITIN, or existing EIN to apply for the number.
Summary / Key Takeaways
For US small business owners and entrepreneurs in 2025, getting an EIN is not merely a formality—it is a critical step for compliance, security, and establishing professional operations.
- Free and Fast: The process is free when done directly through the IRS and immediate if completed online during operating hours (Mon–Fri, 7 a.m. – 10 p.m. ET).
- Essential Requirements: An EIN is mandatory if you plan to hire employees, or if your business is structured as an LLC, partnership, or corporation.
- Protection: Even if you are a sole proprietor, obtaining an EIN provides a valuable layer of privacy, preventing you from having to distribute your personal SSN to banks and vendors.
Think of your EIN as the cornerstone of your business's identity. Just as a building needs a dedicated street address to receive mail and official communications, your business needs its dedicated EIN to interact with the federal government, banks, and the wider financial world as a recognized, separate entity. Getting this foundation right ensures your operational structure is sound from day one.
Disclaimer: This content is for educational purposes only and does not constitute legal, tax, or financial advice. Consult a licensed attorney or CPA for guidance tailored to your situation.