EIN Comparison
EIN vs Business License: What's the Difference? (2026)
An EIN identifies your business to the IRS for taxes. A business license grants legal permission to operate in a location. They are completely different documents — and most businesses need both.
Last updated: July 10, 2026
An EIN and a business license are completely different. An EIN is a federal tax identification number from the IRS that identifies your business for tax purposes. A business license is a permit issued by a city, county, or state that grants legal permission to operate your specific business in that location. An EIN does not authorize you to operate, and a business license is not a tax ID. Most businesses need both.
New owners often assume an EIN and a business license are the same document. They are not. One is a federal tax identifier; the other is local permission to operate. Confusing them leads to operating illegally or missing a tax registration.
This guide sets the two side by side, explains what each does not do, covers which comes first, and notes how requirements change by industry, location, and residency. For the basics of the tax ID, see what is an EIN.
EIN vs Business License: Side by Side
An EIN is a federal tax ID from the IRS; a business license is operating permission from a local or state government. They come from different authorities and serve different functions.
| Attribute | EIN | Business License |
|---|---|---|
| What it is | Federal tax identification number | Permit to operate legally |
| Issued by | IRS (federal) | City, county, or state |
| Purpose | Taxes, banking, hiring | Legal permission to run the business |
| Format | 9 digits (XX-XXXXXXX) | Varies by jurisdiction |
| Cost | Free from the IRS | Varies — often $50-$400 |
| Renewal | Never expires | Often annual |
| Where it applies | Nationwide | Only the issuing jurisdiction |
The EIN is permanent and nationwide. A business license is local and usually renews every year. One number does not replace the other.
What Each Does Not Do
What an EIN and a Business License Cannot Do
An EIN cannot grant permission to operate, and a business license cannot serve as a tax ID. Each has a strict, non-overlapping function.
What an EIN does not do:
- It does not authorize you to operate your business in any city or state.
- It does not replace any permit, zoning approval, or professional license.
- It does not prove your business is legally allowed to sell its product or service.
What a business license does not do:
- It cannot be used to file federal taxes.
- It cannot open a business bank account or process payroll.
- It is not recognized outside the jurisdiction that issued it.
This is why most businesses hold both: the EIN handles federal tax identity, and the license handles the legal right to operate. See who needs an EIN for the tax-ID side.
Which Comes First — EIN or Business License?
The EIN usually comes first. You form the entity, get the EIN, and open a bank account, then apply for local licenses that often ask for the EIN on the application.
Form your legal entity
Register your LLC or corporation with the state (sole proprietors skip this). The entity is the foundation for everything else.
Get your EIN
Apply for the EIN from the IRS. License applications, bank accounts, and tax filings all reference it. See how to get an EIN.
Open a business bank account
Use the EIN and formation documents to open the account that will handle license fees and business income.
Apply for business licenses
Apply for the general business license and any industry-specific permits your city, county, and state require before you begin operating.
Some jurisdictions issue a general business license without requiring an EIN first, so confirm your local order of operations. The EIN-first sequence works in most cases.
Industry and Location
How Do License Requirements Vary by Industry and Location?
Business license requirements vary by industry and location, while the EIN is the same everywhere. A consultant and a restaurant both get one federal EIN, but their licensing differs sharply.
- Location. Cities and counties set their own license rules. A business in one city may need a general license that a neighboring county does not require.
- Industry. Regulated activities — food service, healthcare, finance, construction, childcare — need specific permits on top of a general license.
- Home-based and online. Many home businesses still need a local general license, though some small home operations are exempt.
The EIN never changes across these cases. See the industries hub for how EIN and licensing apply to specific business types.
Do You Need an EIN, a License, or Both?
Most businesses need both, but the licensing side depends on the activity. The EIN requirement is driven by entity type and hiring; the license requirement is driven by what and where you operate.
| Business type | Needs an EIN? | Needs a business license? |
|---|---|---|
| LLC or corporation | Yes | Usually yes |
| Multi-member partnership | Yes | Usually yes |
| Employer (any structure) | Yes | Usually yes |
| Regulated trade (food, health, finance) | Yes | Yes — plus industry permits |
| Sole proprietor, no employees | Often optional | Often yes (local) |
| Home-based online seller | Recommended | Sometimes (check locally) |
The pattern: nearly every formal business needs an EIN, and nearly every operating business needs at least one license. When in doubt, get the EIN first and confirm licensing with your city or county.
Non-Resident Note
Can a Non-US Resident Handle Both Remotely?
A non-US resident can get an EIN remotely from the IRS without an SSN. Business licenses depend on where the business physically operates, so licensing is more location-dependent than the EIN.
The EIN is available to any foreign owner of a US business by filing Form SS-4 with the IRS. Local licenses require meeting the rules of the jurisdiction where the business operates, which may involve a US business address or registered agent. Many non-resident online businesses need only the EIN plus minimal local licensing, while a non-resident opening a physical US location needs full local permits. To start the tax-ID side, see EIN for non-residents and how to get an EIN without an SSN.
Frequently Asked Questions
Is an EIN a business license?
No. An EIN is a 9-digit federal tax identification number issued by the IRS. A business license is a permit issued by a city, county, or state that grants legal permission to operate. An EIN identifies your business for taxes; it does not authorize you to run the business. They are two separate documents from two different authorities.
Do I need a business license and an EIN?
Most businesses need both. The EIN handles federal tax identification, banking, and hiring. The business license grants legal permission to operate in your city, county, or state. Requirements vary by location and industry — some home-based online businesses need only an EIN, while regulated trades need multiple licenses plus the EIN.
Which comes first, EIN or business license?
The EIN usually comes first. You form your legal entity, get the EIN, and open a business bank account before applying for local licenses, because license applications often ask for the EIN. Some jurisdictions issue a general business license independently, so check your local rules, but EIN-first is the common order.
Can I operate with an EIN but no license?
Usually no. An EIN does not grant permission to operate. If your city, county, or state requires a business license for your activity, operating without it can bring fines or closure, even with a valid EIN. A few unregulated online businesses operate with only an EIN, but most activities need a license.
Does a business license work as a tax ID?
No. A business license is permission to operate, not a tax identifier. You cannot use a business license number to file federal taxes, open a bank account, or hire employees. Those require an EIN from the IRS. The two documents cover different functions and cannot substitute for each other.
Can a non-US resident get an EIN and a business license?
A non-US resident can get an EIN remotely from the IRS without an SSN. Business licenses depend on where the business operates — a local license requires meeting that jurisdiction's rules, which may involve a US address or registered agent. Many non-resident online businesses need the EIN plus minimal local licensing.
Where do I get each one?
You get an EIN from the IRS, free by fax or online, or through a service like ein.so for non-residents. You get a business license from your city, county, or state government, depending on your location and industry. Check your city clerk or state business portal for the specific licenses your activity requires.
Do online businesses need a business license?
It depends on the location and activity. Many home-based online businesses need a general business license from their city or county, plus the EIN. Some jurisdictions exempt very small home businesses. Regulated activities — selling food, finance, health services — need specific licenses regardless of whether the business is online.
Get Your EIN First
Start with the federal tax ID. ein.so files your EIN with the IRS. $49 Standard. $97 Express. No SSN required.
Get My EIN for $49