EIN (Employer Identification Number)

An EIN, or Employer Identification Number, is a unique nine-digit number that the IRS assigns to businesses for tax reporting purposes. Think of it as your business's Social Security number. It's formatted as XX-XXXXXXX, and you'll use it on virtually every official document — tax returns, bank account applications, payroll filings, and vendor forms.

You can get an EIN for free directly from the IRS website in about five minutes. The online application is available Monday through Friday, and you get your number immediately upon completion. You can also apply by mail or fax, but there's no reason to — the online process is instant and free. Be wary of third-party services that charge $50-$200 to "help" you get an EIN — they're just filling out the same free IRS form.

Every business with employees needs an EIN. But even sole proprietors without employees often get one because it lets you open a business bank account without giving out your personal Social Security number. It adds a layer of separation between your personal and business identities, which is always smart.

Without an EIN, you can't open a business bank account at most institutions, you can't hire employees, and you'll have to put your personal Social Security number on every W-9 and vendor form — which increases your risk of identity theft. Getting an EIN is free and takes five minutes, so there's no reason not to have one. It's one of the first things you should do when starting a business, right after choosing your structure.