EIN For Your Business: As a business owner, you must maintain your professional and personal lives separate. Obtaining an Employer Identification Number (EIN) is one of the easiest ways to do this. EINs not only protect the confidentiality of Social Security numbers, but also lend credibility to your business.
CNBC Select explains how to apply for an EIN for your business, as well as the eight reasons why you need one.
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What is EIN?
EIN stands for Employer Identification Number.
The Employer Identification Number (EIN) is a federal identifier for your company. It consists of nine digits and resembles a Social Security number. On official forms, it is formatted as 12-3456789 rather than 123-45-6789. The EIN is also known as the Federal Tax Identification Number.
Separate business entities, such as corporations and LLCs, require tax identification numbers. When conducting business, sole proprietors share their EINs to avoid disclosing their Social Security Numbers.
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Reasons Why You Need EIN For Your Business
Although many small businesses operate without an EIN, as your company grows, you will be required to have one for a variety of business functions. These are some of the most common situations in which an EIN is required.
Maintain a distinct legal entity. While sole proprietors can use their Social Security Number (SSN), other business structures must register for an Employer Identification Number (EIN). These include corporations, LLCs, trusts, and other legal entities that are distinct from you.
Keep your Social Security number secure. Sole proprietors may use their SSN to operate a business. For tax purposes, however, they must share it with vendors, clients, tax authorities, and others. Using an EIN prevents your SSN from being disclosed and decreases the likelihood of identity theft.
Create a business checking account. Most types of businesses cannot establish a business bank account without an EIN.
Apply for credit in the business’s name. When applying for a loan, line of credit, or credit card, many institutions require an EIN for your business.
Hire personnel. If a business hires an employee or withholds taxes from income paid to a non-resident alien, it must have an EIN. Your EIN is required for filing and paying federal and state payroll taxes.
Apply for licences and permits for your business. Use your EIN when applying for licences, permits, and other business necessities.
Employ a Keogh plan. This tax-deferred pension plan requires an EIN for participation.
File tax returns for your company. When filing tax returns for employment, excise, or alcohol, tobacco, and firearms, your business must have an EIN.
How to access EIN For Your Business?
Applying for an EIN through the Internal Revenue Service is free. In fact, you can apply for an EIN online at the IRS website and receive it within minutes. Follow these steps to apply for an EIN online for your company.
- Determine qualification. If your enterprise is located within the United States or a U.S. territory, you may apply online. Otherwise, phone applications are required. The applicant must possess a valid tax identification number.
- Fill out an application on the IRS website. Visit this link to begin the EIN application process.
- Select your category of business. Are you a sole proprietorship, a partnership, a corporation, a limited liability company, a trust, or another type of entity?
- Provide a justification for your EIN request. Are you launching a business, employing employees for the first time, opening a bank account, changing the type of organisation, or acquiring an existing company?
- Validate your private information. Provide your personal information, including your Social Security number, and verify that you are eligible to submit an EIN application.
- Commercial location.Share the business’s address (and mailing address, if applicable).
- Business-related data. Provide the name of your company, the county and state in which it is located, and the date and location of its formation.
- Obtain an EIN. Print the confirmation letter that contains your EIN.
Applicants are restricted to one EIN per day per responsible party. Additionally, you can apply for an EIN via fax, mail, or telephone.
Top Small Business Assets
Once you have your EIN, it will be easier to distinguish between personal and business expenses and to take advantage of various small business resources, such as credit cards, checking and savings accounts, loans, and expense monitors. Consider the following beneficial business tools:
- Best credit card for business with no annual fee: Ink Business Unlimited Card Credit
- Best travel credit card for modest business: Inscription of Business Preferred® Credit Card
- Best business checking account overall: Chase Complete Business Banking®
- Best modest business expense tracking software: Using FreshBooks
Conclusion
The application for an employer identification number (EIN) is crucial to your business. Not only does it protect your personal information, but it also enables you to establish a business bank account, hire employees, and perform other crucial tasks. On the IRS website, you can apply for an EIN online and receive your number within minutes. It is simple and straightforward.
