These days, some kind of identification number is a must have in order to do almost any kind of business. Individuals have long used their social security numbers as a means of identification for almost everything from health care to banking—and of course, taxes.

The IRS loves numbers. The identification number that IRS assigns to businesses is commonly referred to as the Employer Identification Number, or EIN. In short, an EIN is somewhat similar to the social security number used by individuals in that it is a unique identifier. A key difference, as implied by its name, is that the entity that has been assigned an EIN is a business that has employees, maybe only one—you, the owner, but we’ll get to that later.

Whereas the format of the SSN is 000-00-000, the format for EINs is 00-0000000. This means that the IRS computers can quickly distinguish between SSNs and EINs to tell if a filing is for an individual or a business.

So does this mean that every business must have an EIN? Not necessarily. To help determine if your business needs an EIN, consider the following:

• Does your business have employees? If so, you are required to have an EIN.
• Does your business pay alcohol, tobacco or firearms taxes? If so, you need an EIN.
• Does your business have a retirement plan? If so, you need an EIN, even if your business is a sole proprietorship and you, the owner, are its only employee.
• Have your formed a corporation or a partnership? If so, you need an EIN.
• Is your business a sole proprietorship? A sole proprietorship does not need an EIN, though it still may be useful.

As you can see from the above, most businesses will need an EIN, and even if you are not required by law to have one, you may find the number useful once you begin your business transactions. For example, banks may require an EIN in order to open a business account.

Getting an EIN is simple. You can complete and mail in the IRS Form SS-4, though this is takes longer than other methods. A quicker route is to call the IRS’s Business & Specialty Tax Line at (800) 829-4933. The preferred method, however, is to use IRS’s; Internet EIN. Within a few minutes of filling out the online form, you will be assigned an EIN. It is important to remember, though, that no matter what method you use, it can take up to two weeks before your EIN becomes a permanent part of your tax record. This means that you may have to wait two weeks after applying before you can file a return or other tax related paperwork.

The best time to get an EIN is before you even begin your business. By doing so, you can save yourself time and stress later on.