Is There a Difference Between an EIN and a FEIN?

Regardless of your industry, when registering your business, most entity types also need to apply for an EIN or FEIN with the Internal Revenue Service (IRS). Your EIN distinctly identifies you to the federal government, allowing you to file taxes, pay employees, and maintain your nonprofit status (if applicable). Having an EIN also provides numerous benefits to the business, making it easier to establish a business bank account and protect your personal identity.

What is a FEIN?

An Employer Identification Number (EIN), or Federal Employer Identification Number (FEIN), is a nine-digit number the IRS assigns to your business for tax and other purposes. Your EIN identifies you to the IRS when filing different types of taxes (payroll, income, etc.). Employers, sole proprietors (with employees), corporations, LLCs, partnerships, nonprofits, trusts, estates, government agencies, certain individuals, and others all use EINs. Whenever you contact the IRS, you use your EIN to identify your business so the correspondence and information are linked to the proper account.

Although you may question “Is a FEIN the same as an EIN?” the answer is yes. The names are interchangeable and refer to the same thing. There is no difference.

What Types of Businesses Require a FEIN?

Most business types require a FEIN. Regardless of whether you structure your company as a sole proprietorship, partnership, limited liability company (LLC), corporation, or nonprofit, you need to apply for and obtain an EIN or FEIN.

There are some exceptions to this rule. Some sole proprietorships and single-member LLCs can do business without an EIN. In these cases, the individual owner will use their Social Security number (SSN) instead when filing taxes and identifying themselves to clients for tax purposes. As long as you don’t hire employees as a sole proprietorship or single-member LLC and comply with other rules, you don’t need an EIN. However, even if your company doesn’t need an EIN, you can still obtain one, and it makes sense to do so; it offers many benefits.

Other Cases Where You Need an EIN

Most businesses need an EIN. Although there are a few exceptions to this rule, most companies will need one because even if they start out small and simple, things may change later. Some of the reasons that a business may require an EIN include:

• Federal Tax Reporting and Compliance

  EINs serve as a business equivalent of a Social Security number, enabling the IRS to identify businesses whenever they file taxes or other tax-related documents. EINs are especially critical for corporations, partnerships, and LLCs, all of which are required to have an EIN for federal income tax purposes, regardless of whether they have employees. It is used on various IRS forms, such as Form 941 (Employer's Quarterly Federal Tax Return) and Form W-2 (Wage and Tax Statement).

• Employees

  If a business has employees, an EIN is necessary for managing payroll and withholding and remitting employment taxes (including federal income tax, Social Security, and Medicare contributions).

• Certain Industries

  Businesses involved in certain activities requiring the filing of excise taxes (like those related to alcohol, tobacco, or firearms) also need an EIN.

• Financial and Administrative Tasks

  When you open a business bank account, most banks require an EIN to open a business bank account, which is crucial for separating business and personal finances. This can help you avoid issues if you ever get audited.

• Applying for Licenses and Permits

  Many states and local jurisdictions require an EIN for obtaining necessary business licenses and permits.

• Business Credit

  An EIN allows a business to establish its own credit history, separate from the owner's personal credit. This is crucial for obtaining loans, lines of credit, or collaborating with specific vendors.

• Working With Other Organizations

  Some organizations, such as nonprofits, may require an EIN from businesses they work with, particularly for grant applications or financial reporting.

• Retirement Plans

  Certain retirement plans, like Keogh plans, require an EIN for those who are self-employed or operating unincorporated businesses.

• Identity Theft Protection

  By using an EIN instead of a Social Security number (SSN) for business activities, individuals can help protect their personally identifiable information (PII) and reduce the risk of identity theft.

Other situations where you need to have an EIN include:

• Trusts, Individual Retirement Accounts (IRAs), and Tax-Exempt Business Income Tax Returns
• Estates
• Real Estate Mortgage Investment Conduits
• Nonprofit Organizations
• Farmers’ Cooperatives
• Plan Administrators

How to Obtain an EIN

Since most business structures do require an EIN, you should apply for one after registering your company with the Secretary of State. Obtaining an EIN is a relatively simple process. Additionally, applying for an EIN is free; no fees are required.

Obtaining an EIN is easy, and you can use two methods to do so. They are as follows:

• By Mail

  Visit the IRS website and download Form SS-4 and print it out. Complete the form with all the information required (see below). Alternatively, you can mail the form to the IRS using the address printed on the form. You may have to wait a bit longer for your EIN to arrive by mail.

• Online Application

  You may also choose to submit your application to the IRS digitally. Visit the IRS website and fill out all the fields. Once you have completed and submitted the online application, you will immediately receive your new EIN after the IRS validates the information. Validation takes place during the application process. Once complete, you can download and print your confirmation letter, which includes your EIN.

• By Fax

  Visit the IRS website and download form Form SS-4 print it out, and complete it with all the necessary information (see below). Fax your completed form to the number listed on there. If you use fax, the IRS will fax you back a confirmation letter with your new EIN within four business days.

The online application option is by far the fastest way to get your EIN. Fax is the second quickest option, and if you apply by mail, you may have to wait up to four weeks to receive your confirmation letter with your EIN.

What Information is Required for an EIN?

When applying for an EIN/FEIN, you must provide the IRS with detailed and specific information about yourself and your business. Those details are as follows:

• The legal name of your business. If you have registered the sole proprietorship under your name, then you will use that. If you have a trade name, “Doing Business As (DBA)” name, you must include that as well.
• Your business’s legal address, including state and country.
• Your name and tax ID (SSN). As a sole proprietorship, you will have the authority to control and manage the business, funds, and all assets.
• The type of entity (corporation, LLC, sole proprietorship, partnership) and the date you started the business.
• Does your business involve gambling, and do you sell alcohol, tobacco, or firearms?
• You must provide the reason you are applying for an EIN. Some examples are acquiring an existing business, starting a new business, or hiring employees.
• The highest number of employees you expect to hire within the next 12 months. You must also designate when you will pay employment taxes (annually or quarterly) and the first date you paid wages to your staff.

Along with the information above, you must also identify your business type from the list of industries below. Use your best guess if nothing matches up perfectly.

• Accommodation & food service
• Construction
• Manufacturing
• Finance & Insurance
• Healthcare & social assistance
• Retail
• Real estate
• Rental & leasing
• Transportation & warehousing
• Wholesale-agent/broker or Wholesale-other
• Other

Reasons to Obtain a FEIN

Even if your business is not required to obtain a FEIN, it is still advisable to do so. Having one offers several key benefits, including protecting your identity, legitimizing your operations, providing access to business banking and credit, and complying with state laws. The details are as follows:

• Protect Against Identity Theft

  Most sole proprietorships must provide their clients with an ID number (usually your social security number) so they can issue a 1099 at tax time for the revenue they paid you. The problem with giving out your SSN is that it opens you up to identity theft. You have no idea how or where your clients store your personal information, including your Social Security number. If stored online, it could be subject to a hack and then end up on the dark web. Having an EIN protects your SSN, and you can give clients your business ID and keep your personal information safe.

• Separate Business and Personal Finances

  It’s always a good idea to separate your business and personal finances, especially at tax time. If you are ever audited, you want to be able to demonstrate that the business income and expenses were kept separate from your individual accounts. Having an EIN allows you to open a business bank account and keep your personal and business finances separate easily.

• Legitimize Operations

  For sole proprietorships that work out of their home, you can deduct certain expenses like a “home office deduction” but only if you have an EIN. The IRS considers businesses that operate with an EIN to be a legitimate operation. Your clients may also view you as more credible and reliable if you have an EIN. Another important distinction is that an EIN helps delineate you as a contractor, not an employee.

• Prepare for Business Growth

  If you ever plan on growing large enough to have employees, you will need an EIN. Most banks will also require that you have an EIN to open a business checking account. You can also obtain loans and apply for financing with an EIN.

• Establish Business Credit

  An EIN allows you to establish business credit that is separate from your personal credit. This could be extremely helpful when you need financing or loans.

• Non-US Entity

  If you are a sole proprietorship working outside of the U.S. and have no social security number, an EIN can help you in many ways. You will need a valid business ID to conduct business in the United States.

• Comply with State Rules

  Business formation is done at the state level. Some states require an EIN for you to operate legally within the jurisdiction. Check with your state before deciding whether to obtain an EIN.

FEIN vs. EIN

An EIN and FEIN are the same thing; there is no difference. Although different agencies may request an EIN or a FEIN, rest assured, if you have an EIN, you are all set. You do not need anything further. There is no separate FEIN.

When is it Necessary to Change Your EIN?

Whenever you change your business structure, you need to apply for a new EIN. EINs are tied to a specific organization (LLC, corporation, partnership, etc.). If you convert from a partnership to an LLC, you will need to change your EIN. Any estate or trust that files tax returns is required to obtain an EIN.

If you are a sole proprietorship and any of the following are true, you need to apply for a new EIN:

• You file for bankruptcy.
• You take on partners and begin operating as a partnership.
• You incorporate your company.
• You buy or inherit a business as a sole proprietor.

If you operate as a partnership and any of the following are true, you will need to apply for a new EIN:

• Your company is integrated.
• One partner takes over the business and operates as a sole proprietorship.
• You dissolve the partnership and form a new one or another type of business structure.

If you operate as an LLC and any of the following are true, you will need to apply for a new EIN:

• You form a new LLC with multiple owners (a multi-member LLC).
• You, as a single-member LLC, decide to be taxed as an S corporation or a C corporation.
• You register as a single-member LLC, but you are still required to file excise taxes with the state.

If you operate an estate, and any of the following are true, you will need to apply for a new EIN:

• Estate funds establish a new trust.
• You represent an estate that runs a business after the owner dies.

If you have a trust, and any of the following are true, you will need to apply for a new EIN:

• Multiple trusts are created or granted by a single person.
• A trust converts into an estate.
• A living trust becomes a testamentary trust.
• A living trust ends by transferring its assets to a residual trust.

Other reasons you may need to apply for an EIN include:

• The Secretary of State grants a new charter to a corporation.
• Your company becomes the subsidiary of a larger corporation.
• You convert to a partnership or sole proprietorship.
• A new corporation is formed through a statutory merger.

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