Small business owners may wonder if they need an EIN (Employer ID Number, also commonly known as a tax ID number) from the IRS. As a sole proprietor, why not just use your social security number?

The primary reason a small business will get an EIN is when they hire employees.

From the IRS website “Do I need an EIN?” the primary reasons for getting an EIN include:

• Started a new business
• Hired or will hire employees, including household employees
• Opened a bank account that requires an EIN for banking purposes
• Changed the legal character or ownership of your organization (for example, you incorporate a sole proprietorship or form a partnership)
• Purchased a going business
• Formed a corporation (including nonprofits)
• Formed a partnership

There are more reasons, but they mostly have to do with trusts and estates.

MyOwnBusiness.org provides a comprehensive list of various licenses and permits you may need as a small business (the page is fairly reader friendly too!) To the above IRS list of reasons to get an EIN, they have a couple of others that I think should be included here:

• You file any of these tax returns: Employment, Excise or Alcohol, Tobacco and Firearms.
• You have a Keogh plan.

Even as a sole proprietor with no employees you may want to get an EIN anyways. Why? Entities you do business with may require a tax id #. With the high risk of identity theft, the less you give out your social security number, the better.

The easiest way to get an EIN is online. Near the bottom of the page (after the notes on planned site shut-downs), find the link: “APPLY ONLINE NOW”.

It’s a pretty quick and easy process, but note that you can’t save the application to complete another time. You’ll be booted after 20 minutes of inactivity. If you want to see what kind of information they’ll be asking for before beginning, you can download the pdf version of the SS-4.

The online process has plenty of commonly asked questions to help you along the way. There are also many “are you sure” type of questions to confirm your entries in many steps. I almost started doubting myself they asked so many times. Happily, I got through it and haven’t come across any negative repercussions as a result =)

When done, remember to print out the confirmation letter and file it in your legal section. Mine is in a file called “IRS - EIN”.