What Is An EIN And Why Do You Need One?
If you are starting your own business, you may need to obtain an EIN to operate. While there are exceptions, most are required to have one.
What Is An EIN?
An EIN, or an Employer Identification Number, is a unique 9-digit number the IRS assigns to identify a business entity. Also known as a Federal Tax Identification Number, they are essential for almost everyone running a business. To better understand the purposes, benefits, and criteria surrounding the usage of Employer Identification Numbers, let’s break it down.
What Is It Used For?
There are four main uses for a business’ EIN.
- Tax purposes: It is used to file a company’s taxes and report employees’ taxes. An EIN is to a business what a Social Security Number is to a person.
- Opening bank accounts: They are required for a business to open up a bank account. This helps distinguish personal finances from business finances, which is important during tax season.
- Employees: If you plan to have any employees, you need an Employer Identification Number to report their taxes to the IRS.
- Business Relationships: When working with clients, vendors, and suppliers, they may request your EIN to keep in their records. This is especially important for conducting business transactions and issuing tax forms.
Who Needs An EIN?
An EIN is a specific type of Taxpayer Identification Number (TIN) the IRS uses to collect taxes on a business and is needed if your business:
- Has employees.
- Operates as a corporation or partnership.
- Files certain tax returns.
- withholds taxes on income (other than wages) paid to a non-resident worker.
- Has a Keogh plan.
- Is involved with certain types of organizations like trusts and estates.
If you are self-employed, you do not need an Employer Identification Number. However, you can still get one if you want to use it instead of your social security number when doing business. This can potentially protect you from identity theft.
Benefits Of An Employer Identification Number
So you have obtained your EIN, but what does it do for you? I will allow your business to:
- Hire and pay employees.
- Open bank accounts, obtain credit and invest surplus cash.
- File taxes and register state taxes
- Shield personal information from identity theft.
- Separate personal and business finances.
An Employer Identification Number is permanently tied to your company when it is created. The IRS cannot cancel an EIN, but they can close the business account it was made for. This is mainly done for start-up companies that never get off the ground.
How Do I Get an EIN?
Employer Identification Numbers can be acquired through the IRS’s website by filling out an SS-4 form. Fortunately, if you are worried about messing up filing an official government form, there’s no need to fret! The experts at FCCR specialize in taking care of this for new businesses. They would be more than happy to take on the task for you, allowing you to focus on making your business great while leaving the official paperwork to us!
Contact FCCR today to see how they can help you get your Employer Identification Number ready to go!
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