Employee Identification Number Key Terms

Learn the terms associated with an EIN

By Autumn Rivers, Lead Copywriter Webflo Studios

If you are considering starting a business of any type, you should check to see if you need an Employer or Employee Identification Number, also known as an EIN. This is required of most business types so that the IRS can recognize your company and tax appropriately. It simply requires calling, faxing or mailing the IRS your application, though you can also apply online. Make sure to learn the key terms you will encounter before you apply.

EIN

EIN is an acronym for Employer Identification Number, which is also often referred to as an employee ID number. It is a Federal Tax number that means your business is recognized by the Internal Revenue Service. Many different business types need an EIN before considering themselves an official business entity.
Try: The Internal Revenue Service website explains everything you need to know about an EIN.

IRS

The IRS is a government agency that is responsible for collecting taxes from people and businesses. For this reason, you have to go through the IRS to obtain an EIN for tax purposes.
Try: Get the definition of the IRS from wiseGEEK.

Business entity

Once you create a business and consider applying for an EIN, you will need to decide what type of business you have. The category your company fits into is called a business entity, and there are six main types.
Try: Visit Montgomery Law Office to get descriptions of the various business entities.

Sole proprietorship

A sole proprietorship is one of the most popular types of business entities created by those with an EIN. A sole proprietorship means you as an individual own the business, and you are not separated from your business legally. This means anyone who sues your company is actually suing you, and can take your personal assets.
Try: Justia gives the basics on a sole proprietorship.

Limited Liability Company

This occurs when two or more people, including families, create a company. In an LLC, owners do not get taxed double like corporation owners do, which is one perk. Many small businesses favor this type of business entity because it also offers more flexibility than a corporation does, as it can be either owner-managed or overseen by an assigned supervisor.
Try: Limited Liability Company Center provides a thorough explanation of a limited liability company.

Partnership

When two or more people own a business together and consider themselves co-owners, they are in a partnership. You can file business papers, such as a written agreement, but it is not required to file any documents to become a partnership.
Try: Nolo explains everything you need to know about partnerships.