Business Entities and Considerations · Business entities

Employer identification number

The employer identification number is administrative, and that is why it produces errors. It is not a tax status, not an election, and not evidence of anything about how an entity is classified — it is a label the Service attaches to a filer. Clients treat it as though it carried meaning, and the practitioner’s job is usually to talk them out of an unnecessary application, or into a necessary one they had not thought about.

The rule

The statutory requirement. any person required to make a return, statement or other document must include the identifying number prescribed for securing proper identification, must furnish that number to another person required to show it, and must furnish the number of another person where required (IRC § 6109(a)(1) to (3))^TY2026Verified 2026-08-21IRC § 6109(a), read at law.cornell.edu/uscode/text/26/6109

Which number each person uses. an individual required to furnish a taxpayer identifying number uses a social security number, or an individual taxpayer identification number if not eligible for one; any person other than an individual — corporations, partnerships, nonprofit associations, trusts, estates and similar nonindividual persons — uses an employer identification number (Reg. § 301.6109-1(a)(1)(ii)(A) to (C))^TY2026Verified 2026-08-2126 CFR § 301.6109-1(a)(1)(ii), read at law.cornell.edu/cfr/text/26/301.6109-1

Sole proprietors and employers. an individual, whether U.S. or foreign, who is an employer or who is engaged in a trade or business as a sole proprietor should use an employer identification number as required by returns, statements or other documents and their instructions (Reg. § 301.6109-1(a)(1)(ii)(D))^TY2026Verified 2026-08-2126 CFR § 301.6109-1(a)(1)(ii)(D), read at law.cornell.edu/cfr/text/26/301.6109-1

That paragraph is worth reading twice, because it is the answer to the most common misconception. A sole proprietor is an individual, and an individual normally uses a social security number — but a sole proprietor who is an employer, or who is engaged in a trade or business, uses an employer identification number where the return or form calls for one (Reg. § 301.6109-1(a)(1)(ii)(D)). Sole proprietors are not merely permitted to have one; the regulation says they should use one.

Applying. any person required to furnish an employer identification number must apply for one, if not done previously, on Form SS-4, far enough in advance of the first required use to permit issuance in time for compliance (Reg. § 301.6109-1(d)(2)(i))^TY2026Verified 2026-08-2126 CFR § 301.6109-1(d)(2)(i), read at law.cornell.edu/cfr/text/26/301.6109-1

Who may be named. a responsible party is someone who owns, controls or exercises effective control over the entity and directly or indirectly manages its funds and assets; the application must name one and give their taxpayer identification number, and the responsible party must be a person rather than an entity except for government entities. It is usually the principal officer of a corporation or tax-exempt organisation, a general partner of a partnership, the grantor, owner or trustor of a trust, or the fiduciary of an estate^TY2026Verified 2026-08-21IRS, Responsible parties and nominees, page last reviewed 28 June 2026, read at irs.gov/businesses/small-businesses-self-employed/responsible-parties-and-nominees

Who may not. a nominee — someone given limited authority to act during formation, with little or no control over the entity assets — cannot apply for an employer identification number and should not be listed on Form SS-4; where a nominee is used for state formation the responsible party must be identified before the application is made^TY2026Verified 2026-08-21IRS, Responsible parties and nominees, page last reviewed 28 June 2026, read at irs.gov/businesses/small-businesses-self-employed/responsible-parties-and-nominees

The online application. the online application is available only to a domestic organisation formed in the United States or its territories whose principal place of business is there, applied for by the responsible party in control of the entity or an authorised representative holding the responsible party social security number or individual taxpayer identification number; an applicant whose principal place of business is outside the United States must apply by phone, fax or mail^TY2026Verified 2026-08-21IRS, Get an employer identification number, page last reviewed 19 August 2026, read at irs.gov/businesses/small-businesses-self-employed/get-an-employer-identification-number

The daily limit. an applicant may obtain only 1 employer identification number per responsible party per day; the online application must be completed in one session and expires after 15 minutes of inactivity^TY2026Verified 2026-08-21IRS, Get an employer identification number, page last reviewed 19 August 2026, read at irs.gov/businesses/small-businesses-self-employed/get-an-employer-identification-number

Keeping the application current. a person issued an employer identification number must provide the Service with any updated application information in the manner and frequency required by forms, instructions or other guidance — a requirement applying to every holder of an employer identification number on or after 1 January 2014 (Reg. § 301.6109-1(d)(2)(ii))^TY2026Verified 2026-08-2126 CFR § 301.6109-1(d)(2)(ii), read at law.cornell.edu/cfr/text/26/301.6109-1

When a sole proprietor needs a new one. a sole proprietor needs a new employer identification number on incorporating, on forming a partnership, or on declaring bankruptcy, and does not need one on changing the business name or location or on owning multiple businesses^TY2026Verified 2026-08-21IRS, Do you need a new EIN?, page last reviewed 21 July 2026, read at irs.gov/businesses/small-businesses-self-employed/do-you-need-a-new-ein

When a corporation does. a corporation needs a new employer identification number on receiving a new charter from the secretary of state, on becoming a subsidiary of another corporation, on changing to a partnership or sole proprietorship, or on merging to create a new corporation — and does not need one on changing name or location, declaring bankruptcy, being a division, surviving a merger, electing S corporation status, reorganising to change only identity or location, or converting at State level without changing structure^TY2026Verified 2026-08-21IRS, Do you need a new EIN?, page last reviewed 21 July 2026, read at irs.gov/businesses/small-businesses-self-employed/do-you-need-a-new-ein

When a partnership does. a partnership needs a new employer identification number on incorporating, on one partner taking over to operate as a sole proprietor, or on ending a partnership and beginning a new one — and does not need one on changing name or location, declaring bankruptcy, or undergoing a change in ownership that does not terminate the partnership^TY2026Verified 2026-08-21IRS, Do you need a new EIN?, page last reviewed 21 July 2026, read at irs.gov/businesses/small-businesses-self-employed/do-you-need-a-new-ein

When an LLC does. an LLC needs a new employer identification number on terminating and forming a new corporation or partnership, or where a single-member LLC must file excise or employment taxes — and does not need one on changing name or location, reporting as a branch or division of another entity with no employees and no excise tax, converting a partnership to an LLC classified as a partnership, or changing its tax election to a corporation or S corporation^TY2026Verified 2026-08-21IRS, Do you need a new EIN?, page last reviewed 21 July 2026, read at irs.gov/businesses/small-businesses-self-employed/do-you-need-a-new-ein

The one case where a new partnership keeps an old number. a new partnership formed as a result of the termination of a partnership under IRC § 708(b)(1)(B) retains the employer identification number of the terminated partnership (Reg. § 301.6109-1(d)(2)(iii))^TY2026Verified 2026-08-2126 CFR § 301.6109-1(d)(2)(iii), read at law.cornell.edu/cfr/text/26/301.6109-1

Current figures

How it works in practice

The organising idea across all four lists is that a new number follows a new entity, not a new fact about an existing one. Renaming a business does not create an entity, and nor does moving it, opening another location, or going bankrupt — bankruptcy changes who controls the entity’s assets but not what the entity is, which is why it appears on the “no new number” side for corporations and partnerships. What does create a new entity is a change of structure: a sole proprietor who incorporates, a partnership that incorporates, a corporation that becomes a partnership.

Bankruptcy is the exception that proves the point and it is the item most often got wrong, because it appears on both sides depending on the entity. A sole proprietor who declares bankruptcy does need a new number; a corporation or partnership does not. The reason is that a sole proprietorship has no legal existence apart from its owner, so the bankruptcy estate is a genuinely different taxpayer, whereas a corporation in bankruptcy is the same corporation.

The corporate list contains a pair of items that read like a contradiction until you separate federal classification from State existence. A corporation that chooses to be taxed as an S corporation keeps its number: nothing has been formed, an election has been made. But a corporation that gets a new charter from the secretary of state needs a new one, even if the business is identical, because the State has created a different legal person. The same distinction runs through the LLC list: changing the tax election to corporation or S corporation does not require a new number, while terminating the LLC and forming a corporation does.

The single-member LLC entry deserves particular care. A disregarded LLC with no employees and no excise tax liability can operate on its owner’s number; the moment it must file employment or excise taxes it needs its own, because those returns are filed by the entity rather than by the owner. That follows from the classification rules rather than from anything in the EIN guidance — a disregarded entity is treated as a corporation for subtitle C — and it is the practical reason so many single-member LLCs end up with a number they did not initially need.

Naming the responsible party is a real compliance step and not a formality. The person named must own, control, or exercise effective control over the entity, must be an individual rather than an entity except for government entities, and their own taxpayer identification number goes on the form. A nominee — a formation agent, a registered-agent service, a lawyer holding an interest temporarily — cannot be named. Where the responsible party changes afterwards, the duty to keep the application information current is what obliges the entity to report it (Reg. § 301.6109-1(d)(2)(ii)).

The one-per-day limit is per responsible party, not per applicant or per adviser. A practitioner forming five entities for the same client on the same day will get one number and be refused the rest, which is a scheduling problem worth knowing about before the closing date rather than on it.

Scenarios

How this has changed

The requirement to keep application information current is comparatively recent, applying to every holder of an employer identification number on or after 1 January 2014. Before it there was no continuing obligation attached to the number at all — an entity applied once and the Service’s record aged with it. The consequence in practice is that the responsible party recorded for many older entities is a person who has long since left, and correcting it is a compliance obligation rather than a housekeeping option.

The rule for partnerships terminating under IRC § 708(b)(1)(B) applies to terminations occurring on or after 9 May 1997, and it survives as a curiosity: the provision that produced those terminations — a sale or exchange of half or more of the interests in capital and profits within twelve months — was repealed for partnership taxable years beginning after 2017, so the technical termination it addressed can no longer occur. The regulation text remains, and material describing technical terminations as a live event is describing repealed law.

Applications by international applicants and the online tool’s availability windows change from time to time; the tool is limited to domestic organisations with a U.S. principal place of business, and everyone else applies by phone, fax or mail. Anything more specific than that is operational rather than legal and should be checked against the current IRS page rather than remembered.

Exam focus

Nearly every question on this topic is a “does this require a new EIN” question, offered as a list of four changes with one that differs from the rest. Learn the four IRS lists as pairs of columns rather than as prose, and note where the same event sits differently for different entity types — bankruptcy is the one that does this most often.

Two further shapes recur. First, a question about who may be named on Form SS-4, where the answer turns on the responsible party being an individual with actual control and on nominees being excluded. Second, a question about whether a sole proprietor may or must have a number, where the trap answer is that a sole proprietor uses only a social security number. Read the option carefully: a sole proprietor with no employees may operate on a social security number, but the regulation directs an individual who is an employer or in a trade or business to use an employer identification number, and the option asserting ineligibility is always wrong.

Check yourself

1. A corporation changes its name, relocates its head office to another State, and elects S corporation status, all in the same year. How many new employer identification numbers does it need?

Answer: none. On the IRS guidance a corporation does not need a new number on changing its name or location or on choosing to be taxed as an S corporation. Each of the three is a change to an existing entity rather than the creation of a new one.

2. A sole proprietor with two employees files for bankruptcy. Does the business need a new employer identification number?

Answer: yes. Declaring bankruptcy is on the IRS list of events for which a sole proprietor needs a new number, because the bankruptcy estate is a separate taxpayer from the individual. The same event does not require a new number for a corporation or a partnership, which continue to exist as the same legal persons.

3. A practitioner needs employer identification numbers for three trusts, all with the same grantor, on the same day. What is the constraint?

Answer: one per day. The limit is one employer identification number per responsible party per day, and for a trust the responsible party is the grantor, owner or trustor. Because the grantor is the same person for all three, only one application will succeed that day; the others must be made on subsequent days.

4. A formation agent incorporates a company on a client’s behalf and holds the sole share until the client’s paperwork is complete. May the agent be named as responsible party on Form SS-4?

Answer: no. That is a nominee — someone given limited authority during formation with little or no control over the entity’s assets — and the IRS guidance states that nominees cannot apply for an employer identification number and should not be listed on Form SS-4. The responsible party must be identified before the application is made.

5. Three partners sell most of the interests in their partnership’s capital and profits to incoming partners over a nine-month period in 2026, and the partnership continues in business. Does it need a new number?

Answer: no, on two independent grounds. A change in ownership that does not terminate the partnership is expressly on the “no new number” side of the IRS guidance. And the technical termination that such a transfer once triggered under IRC § 708(b)(1)(B) was repealed for partnership years beginning after 2017, so nothing terminates here at all.