An EIN is a federal identification number issued by the IRS to identify a business entity (similar to a social security number being issued to identify an individual, except that an EIN is used to identify a business entity instead of a person).
An EIN is also known as a Tax ID number. Legally, you are required to identify your business with one of two numbers: either your social security number or an EIN.
Generally you need an EIN when your business:
• Is new
• Hires, or will hire, employees
• Is an LLC or Corporation
• Opens a bank account
Small business owners should get an EIN and use that number as the only way to separate your personal credit and personal liability from your business activity.
There is no personal asset protection or personal credit protection for people that do business as a sole proprietor.
Furthermore, banks require an EIN in order to open a business bank account.
