Employer Identification Number (EIN)

Cite this article as:"Employer Identification Number (EIN)," in The Business Professor, updated July 7, 2014, last accessed July 16, 2020, https://thebusinessprofessor.com/lesson/employer-identification-number-ein/.
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Employer Identification Number
This video explains what is an employer identification number and the requirements to secure one.

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Employer Identification Numbers (EIN) Explained

The employer identification number is the method by which businesses transmit tax information to the State and Federal Governments. The FEIN is issued by the Internal Revenue Service (IRS). Your State’s Department of Revenue may use the same number (State EIN) or issue a similar identification number.

A Little More or Employer Identification Numbers

The Employer Identification Number (EIN) is used to identify the business entity or employer in the country. You can think of it as a Social Security Number (SSN) (which is issued to check the identity of residents of USA) but for businesses. The Federal EIN is issued by Internal Revenue Service (IRS) which is nine-digit unique codes and it reflects where does the employer or business entity exists and registers.

Businesses generally obtain an EIN at the time of filing for business entity status in the state. They either visit the IRS website or call or fax the IRS. If you want to change your business entity status, you must petition for a new EIN. The individuals will reach out to the state taxing authority to acquire a state EIN once the Federal EIN is issued.
An Employer Identification Number is required for all forms of business including sole proprietorship, partnership, private companies, trust, and public ltd companies. A sole proprietorship without employees may file taxes under the business owner’s social security number. The EIN becomes mandatory when the business acquires employees and is required to withhold payroll taxes on those individuals.

Without an EIN, the business cannot legally pay (or without payroll taxes) their employees, nor can they file income tax returns. Furthermore, a business without an EIN cannot open an account with a bank or brokerage house.

Note: Obtaining a business EIN is also important for Establishing Business Credit.

References for Employer Identification Number



Note: Obtaining a business EIN is also important for Establishing Business Credit.

Academic Research on Employer Identification Number

  •  Developing fully functional E-government: A four stage model, Layne, K., & Lee, J. (2001). Government information quarterly18(2), 122-136. This paper highlights the experiences of different organizations with representatives of e-government. This paper aims to clear the common misconceptions that the public administration have about e-government and their related organizations by proposing a “stage of growth” model for fully functional e-government.
  • Returns to firm-provided training: evidence from French worker–firm matched data1, Goux, D., & Maurin, E. (2000). Labour economics7(1), 1-19. This paper explores the impact of firm-provided trainings in France. Results show that individuals most likely to be placed in training programs are those with the highest unmeasured abilities.
  • Measuring the dynamics of young and small businesses: Integrating the employer and nonemployer universes, Davis, S. J., Haltiwanger, J., Jarmin, R. S., Krizan, C. J., Miranda, J., Nucci, A., & Sandusky, K. (2007).  (No. w13226). National Bureau of Economic Research. This paper explores the preliminary version of an Integrated Longitudinal Business Database (ILBD) that combines administrative records and survey data for all employer and nonemployer business units in the United States. This study examines the growth of migrants salary prior to the year and the year of transition.
  • The longitudinal business database, Jarmin, R. S., & Miranda, J. (2002). This paper describes recent efforts at CES to create a new longitudinal research dataset: the Longitudinal Business Database (LBD).to employer’s status.
  •  Employer-to-employer flows in the US labor market: The complete picture of gross worker flows, Fallick, B., & Fleischman, C. A. (2004). This paper explores the employer-to-employer (EE) with regards to labor market and business cycle dynamics. After looking at various studies on this concept, we can clearly see the rate of neglect of the measure and size of this flow. Thus, this paper aims to construct the first reliable measure of EE flows for the United States using the “dependent interviewing” technique which was first introduced in the 1994 Current Population Survey.
  • Correlates of training: An analysis using both employer and employee characteristics, Frazis, H., Gittleman, M., & Joyce, M. (2000). ILR Review53(3), 443-462. This paper aims to answer the different questions related to employers training, with emphasis placed on the amount, the provider, and the benefactor of such trainings. In an attempt to answer these questions, the author employs data from the 1995 Survey of Employer-Provided Training.
  • Profit sharing and productivity: Microeconomic evidence from the United States, Kruse, D. L. (1992). The Economic Journal102(410), 24-36. This study tests an important implication of Weitzman’s profit-sharing theory-the prediction that profit-sharing firms will have more stable employment than fixed-wage firms-using panel data on 2,976 publicly traded companies for the years 1971-85. Results show that Profit Sharing firms in the manufacturing industry have lesser unemployment rate than  non-profit firms in this sector. However, there is no difference in the stability of employment for profit and non-profit sharing firms in other sectors different from the manufacturing industry.
  • The effects of employer and client identification on internal and external auditors’ evaluations of internal control deficiencies, Stefaniak, C. M., Houston, R. W., & Cornell, R. M. (2012). Auditing: A Journal of Practice & Theory31(1), 39-56. The Public Company Accounting Oversight Board’s (PCAOB) Auditing Standard No. 5 (AS5) encourages external auditors to rely on internal auditors to increase the efficiency of lower-risk internal control evaluations (PCAOB 2007). This paper compares the levels and effects of employer (client) identification on the control evaluations of internal (external) auditors using post-SOX experimental data.
  • An integrative review of employer branding and OB theory, Edwards, M. R. (2009). Personnel review39(1), 5-23. The purpose of this paper is to review the existing literature linked to the emerging field of employer branding, with a view to adding insight from the perspective of the management of human resources.
  • Employer monopsony power in the labor market for undocumented workers, Hotchkiss, J. L., & Quispe-Agnoli, M. (2009). Using matched employer-employee data from the state of Georgia, this paper investigates the potential for employer monopsony power in the labor market for undocumented workers.

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