Employer Identification Number (EIN)

Various entities are eligible to receive an EIN, including entities like limited liability companies (LLCs), sole proprietorships, partnerships, corporations, government agencies, estates, trusts, military entities, churches, farmers’ cooperatives, or Indian tribal governments and enterprises. 

No. Self-employed individuals, such as independent contractors and freelancers, do not need an EIN. However, they are still eligible to acquire one because it can be used for identification during tax reporting (instead of an SSN). 

You can apply for an EIN for free online or over the phone, including other more traditional methods, such as fax or mail. To do so, the business must be located in the US. Applicants must complete the Form SS-4, which is available on the IRS website. Once the submitted information is validated, the company receives the EIN immediately.

The form must include data about the entity type, start or acquisition date, the reason for applying (for example, if it’s a new business, an organizational change, or IRS withholding compliance), and the business’s industry. The application must also have details such as the name and the TIN of the company’s principal officer, general partner, grantor, owner, or trustor. 

No. Once the EIN is assigned to a company, it’s linked to it, and the IRS can’t remove it. That’s why even if the company doesn’t file any returns, the EIN is kept and associated with an entity in case it will need to use it later for financial reporting purposes. 

The main reason why businesses need EINs is that they are required to legally operate in the US. So, before starting a business, entities apply for an EIN, which is also needed for operations like hiring employees or opening bank accounts, including filing taxes or maintaining corporate protections. Another positive impact that comes with an EIN is that it helps categorize personal and business finances, protecting data from breaches or fraud, such as identity theft. 

An EIN is a type of TIN, or Tax Identification Number, which is a term used to describe different identification numbers associated with tax reporting. For example, both Social Security Numbers (SSNs) and Employer Identification Numbers (EINs) are types of TINs. So, the type of TIN used in a situation depends on the taxpayer. For example, a sole proprietorship uses its SSN, while a partnership uses its EIN. 

EIN verification is part of the Know Your Business (KYB) framework, which is designed to verify the legitimacy of another company and comply with regulatory requirements in high-risk industries, such as banking. KYB verification consists of different background checks and verification steps, for example, verifying the other entity’s address to see if it matches the provided information (for example, if the HQ shows a real office location) or identifying all ultimate beneficial owners (UBOs) to detect potentially shady ownership details (which can be linked to bigger issues, including money laundering through shell companies). 

That said, when the company’s EIN is checked and approved to be legitimate, the business conducting the verification can confirm that the entity is operating legally and is properly registered. 

Yes, iDenfy’s software can be tailored to match the company’s unique onboarding use case. There’s an option to set up a custom KYB flow in the KYB dashboard.

Then, a simple flow from your side follows: 

1. Enable TIN/EIN verification and click on its checkbox in the Company Information section (next to sole proprietorship, director information, representative information, or ownership structure).
2. After saving this option in the configuration section of the custom KYB flow, approve the automation to ensure the custom KYB checks with the extra TIN verification runs.

The status (results) regarding the TIN in the KYB dashboard will be displayed as either Not Checked or Verified.