Overview

Deciding between an EIN and your SSN matters for privacy, banking, payroll, and IRS reporting. An EIN is a business tax identification number issued by the IRS; an SSN is a personal identifier issued for individual tax and Social Security purposes (IRS). Using an EIN separates your business from your personal identity and reduces SSN exposure to vendors, banks, and contractors.

When an EIN is required (IRS rules)

  • You must get an EIN if you hire employees. (IRS: Employee Identification Number (EIN))
  • Corporations and partnerships are required to have an EIN.
  • You generally need an EIN if you file employment, excise, or alcohol/tobacco tax returns, or if you withhold taxes on nonemployee compensation.
  • Other reasons: you have a Keogh plan or you’re involved with certain organizations.

Source: IRS guidance on EINs — https://www.irs.gov/businesses/small-businesses-self-employed/employee-identification-number-ein

When you can use an SSN

Practical benefits of using an EIN

  • Privacy and identity protection: gives vendors and banks a TIN that isn’t your SSN.
  • Business banking and credit: many banks require an EIN to open a business checking account and lenders expect one for business loans.
  • Hiring and payroll: needed to report wages and employment taxes.
  • Credibility: an EIN can make your operation look more established to partners and vendors.

How to decide: quick checklist

  • Do you plan to hire employees? Get an EIN.
  • Are you forming an LLC, partnership, or corporation? Get an EIN.
  • Will you open a business bank account or apply for business credit? Strongly prefer an EIN.
  • Are you a solo sole proprietor with no employees and minimal risk? You can use an SSN, but consider an EIN for privacy.

How to apply for an EIN

  • Online (fastest) via the IRS EIN Assistant for applicants in the U.S. — immediate issuance in most cases.
  • Mail or fax using Form SS-4.
  • International applicants may call the IRS’s international EIN number. See IRS EIN page for current options and instructions.

Can I change or get a new EIN?

  • An EIN generally stays with the entity for its life. Changes in ownership or entity type (for example, sole proprietor to corporation) typically require a new EIN. Refer to IRS rules for specific situations.

Real-world example (practical insight)

I worked with a freelancer who used her SSN for years. Once she formed an LLC and started hiring a part-time assistant, she applied for an EIN to open a business bank account and run payroll. That reduced her SSN exposure and simplified tax reporting.

Common misconceptions

  • “Small businesses don’t need EINs.” Not always true. Many small entities still need an EIN once they hire employees or change structure.
  • “An EIN protects you from all liability.” An EIN separates tax reporting but does not shield personal liability—entity structure and proper corporate formalities do that.

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Quick FAQs

  • Do sole proprietors need an EIN? Not always; a sole proprietor without employees can use an SSN, but an EIN reduces SSN exposure and is often required to open business bank accounts.
  • Can I use my EIN for 1099s? Yes—payers use an EIN or SSN/TIN to report payments.
  • Is the EIN public? The EIN can appear on publicly filed tax or registration documents; keep it secure similarly to an SSN.

Authoritative sources

Disclaimer

This article is educational and does not replace personalized tax, legal, or accounting advice. For decisions that affect taxes, liability, or business structure, consult a licensed tax professional or attorney.