Do You Need an EIN to Open a Business Bank Account?

This question causes more delay than any other step in setting up a business account, because two different sets of rules get mixed together. Sorting out which one applies to you takes a minute and saves a wasted trip to the bank.

What the IRS actually requires

The IRS requires an EIN when your business does any of the following:

• has employees
• operates as a corporation or a partnership
• files employment, excise, or alcohol, tobacco and firearms returns
• withholds taxes on income, other than wages, paid to a non-resident alien
• has a Keogh plan
• is involved with certain trusts, estates, REMICs, non-profits, farmers’ co-operatives or plan administrators

Read that list again if you are a one-person business, because a single-member LLC with no employees appears nowhere on it. The IRS treats it as a disregarded entity: the business does not file its own income tax return, its profit and loss lands on your personal Schedule C, and for that purpose your Social Security number is the identifying number.

So the honest answer to “does the IRS require an EIN?” for most solo founders is no. Which is exactly why the next section catches people out.

What banks require, and why it is different

Banks are not applying the tax code. They are applying customer identification rules that come out of anti-money-laundering law, and those rules ask them to identify the entity opening the account, separately from the person walking in.

In practice that means most banks ask for an EIN on any account opened in a business name, including single-member LLCs. Some will open a sole-proprietor account on an SSN alone. Fewer will do it for an LLC, because the LLC is a legal entity distinct from you, and the whole point of the account is to keep that distinction visible.

It is worth being blunt about the asymmetry: the IRS rule is a floor, and the bank’s policy sits above it. A bank is free to ask for more than the law strictly requires, and most do.

The case for getting one anyway

Even where you could use your SSN, there are three reasons not to.

It keeps your Social Security number off business paperwork. Every client who pays you more than $600 needs a W-9 with a taxpayer identification number on it. With an EIN, that form carries a number that is not the one attached to your credit file. This is the reason most freelancers get one long before they need to.

It is what the separation argument rests on. The reason to hold business money in a business account is to show the business is a distinct entity — the argument we make in full in setting up an LLC for your side hustle. An account opened in the LLC’s name, under the LLC’s own tax ID, is the clearest version of that. An account in your name with business money in it is the weakest.

You will need it eventually. Hiring one person, electing S-corp treatment, or bringing in a partner all trigger the requirement. Getting it at the start costs ten minutes; getting it later means updating the bank, your payment processor and every client’s W-9.

How to get one, in about ten minutes

Apply directly with the IRS. It is free, and the online application issues the number at the end of the session rather than by post.

1. Check you are eligible to apply online. You need a valid taxpayer identification number — an SSN, ITIN or existing EIN — and the business’s principal location must be in the US or a US territory.
2. Have the formation details to hand. The legal name of the entity exactly as registered, the state, the formation date, and the name and taxpayer ID of the responsible party, which for a single-member LLC is you.
3. Complete it in one sitting. The IRS application times out after a period of inactivity and does not save progress, so set aside a clear fifteen minutes rather than starting it between calls.
4. Save the confirmation letter. The notice you can download at the end is the document your bank will ask to see. Keep it with your articles of organisation.

One limit worth knowing: the IRS issues one EIN per responsible party per day. If you are forming two entities, you are doing this over two days.

What not to pay for

Search for “EIN application” and much of the first page is companies charging $50 to $300 to file a free form. They are not doing anything you cannot do yourself in ten minutes, and they are not faster — the IRS issues the number at the end of the online session either way.

Formation services often bundle an EIN into a package. That can be reasonable if you are paying them to form the entity anyway. Paying for the EIN alone is not.

Who this is wrong for

If you have not formed the entity yet, do that first. An EIN issued to an LLC that does not exist yet creates a mismatch between the name on the tax ID and the name on the state registration, and banks reject on exactly that mismatch.

If you are a sole proprietor with no LLC and no employees, you may genuinely not need one, and some banks will open an account on your SSN. The W-9 privacy argument still applies, so it is worth ten minutes regardless.

If you are not a US person, the online application is closed to you and the route is different — the IRS handles those applications by fax or post, and the timeline runs to weeks rather than minutes.

Then open the account

With the EIN letter in hand, the rest is paperwork you can gather in an afternoon. Our comparison of business checking accounts for an LLC covers which accounts charge nothing monthly and which quietly require a minimum balance, and the side-hustle version covers the same ground for smaller balances.