Definition
A nine-digit number the IRS assigns to a business, trust, or estate for tax purposes, the business equivalent of a Social Security number. Sole proprietors can operate under their own SSN, but an EIN is required to hire employees, open most business bank accounts, and form a corporation or partnership. It is free to obtain directly from the IRS.
Why it matters
Using an EIN instead of your SSN on client tax forms and business accounts limits how widely your personal number circulates and keeps business and personal finances separate, which matters for taxes, liability, and clean bookkeeping.
Example
A freelancer earning $70,000 a year from six clients applies for an EIN and gives that number on every W-9 instead of their SSN. The 1099-NEC forms arrive under the EIN, the business checking account is opened with it, and none of the six clients ever holds the freelancer's Social Security number.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.