A partnership EIN is an Employer Identification Number given to a partnership for federal income tax purposes. Essentially, the EIN is the Social Security Number for the business. 3 min read updated on February 01, 2023
A partnership EIN is an Employer Identification Number given to a partnership for federal income tax purposes. Essentially, the EIN is the Social Security Number for the business. Most companies will obtain an EIN for federal tax purposes, even if the company isn’t required to file federal taxes. The reason for this is to separate the business from its owners and open a business bank account.
Does a Partnership Need a Separate Tax ID?
Most businesses, including partnerships, must register with the Internal Revenue Service (IRS), along with state and local agencies. For that reason, the business must obtain an EIN. This nine-digit number is issued by the IRS (Form SS-4) and is used to identify your business when submitting tax documents.
Keep in mind that not all business structures are required to obtain an EIN. For example, most sole proprietors utilize their personal Social Security Number as opposed to a business EIN, as the business itself isn’t required to pay federal taxes. Instead, the profits and losses of the sole proprietorship are reported on the sole owner’s personal income tax return. Keep in mind that if you plan on hiring employees for your sole proprietorship, you will be required to obtain an EIN.
Furthermore, those operating a single-member LLC with no employees, meaning that you are the sole owner and have no other owners or employees assisting you in your business operations, then you need not obtain an EIN. However, if you are not the sole owner or if you have employees working for you, then you will need to obtain a separate EIN for your LLC. The reason for this is because any business with employees will have additional tax requirements to abide by; these tax requirements require you to utilize a business EIN rather than a personal Social Security Number. Moreover, if there is more than one owner, such owners cannot use their personal Social Security Numbers. Instead, the IRS requires that you use a business EIN when submitting tax documentation.
However, all partnerships are required to obtain an EIN. While a partnership involves two or more people, they are only required to obtain one EIN. Come tax season, the partners will fill out Form 1065 Schedule K-1, which will assist them in identifying their self-employment income during that taxable year.
Benefits of Obtaining an EIN
There are many benefits of obtaining an EIN, including the following:
- You can open a business bank account in the name of your business.
- You can apply for credit or loans through the business without having to personally guarantee the loan(s).
- You can obtain business permits and other applicable licenses.
- You can provide any independent contractors that work for your business with a 1099 form, which is required under federal law.
- It can provide additional privacy due to the fact that you are not utilizing your personal Social Security Number.
What You Need to Obtain an EIN
In order to obtain an EIN, you can simply visit the IRS website and visit the request portal. You can request an EIN online, by mail, over the phone, via fax, via e-mail, or in person. Due to the great flexibility in how to obtain an EIN, it is a very simple and straightforward process that should be done immediately after forming your business. With that said, there a few things that you need in order to obtain your EIN. Such information is as follows:
- Business address
- Business owner or officer
- Number of members if you operate an LLC
- Date the company began doing business
- Type of business
- Number of employees
- Contact info where you can be reached, i.e., telephone, email address, etc.
If you are faxing your request, you can expect a return fax with your new EIN within four business days. If you choose to mail the SS-4 form, it could take up to a few weeks, depending on how long it takes for the IRS to first receive your request by mail. Thereafter, you will have to wait additional time to have the IRS review and approve your request and mail the ID number to you. The quickest way to submit your request is online, as it takes as little as an hour to receive your EIN.
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