What is EIN?
It’s a Employer Identification Number consisting of 9 digits. Its like your SSN (Social Security Number) to your business. It’s your legal business identity. It’s a unique identifier assigned by the IRS for business entities. It’s used primarily for tax purposes, similar to how a Social Security Number is used for individuals.
What is an EIN used for and why do I need it?
Here’s why you need an EIN:
- Tax Filing: An EIN is required for filing federal and state tax returns for your business.
- Opening a Business Bank Account: Banks typically require an EIN to open a business account.
- Hiring Employees: If you plan to hire employees, you’ll need an EIN to report their employment taxes.
- Applying for Business Licenses and Permits: Many licenses and permits at the local, state, and federal levels require an EIN.
- Establishing Business Credit: An EIN is often needed to apply for business loans or credit.
Overall, an EIN helps separate your personal and business finances, providing a layer of protection and professionalism for your business.
Why do you as a small business need to get an EIN?
As a small business, obtaining an Employer Identification Number (EIN) is crucial for several reasons:
- Legal Requirement: If you have employees, operate as a corporation or partnership, or meet other IRS criteria, you’re required to have an EIN.
- Tax Purposes: An EIN is necessary for filing federal and state tax returns, ensuring your business complies with tax laws.
- Business Bank Account: Banks usually require an EIN to open a business bank account, which helps manage your finances separately from personal accounts.
- Hiring Employees: You’ll need an EIN to handle payroll and employment taxes when you hire employees.
- Business Licenses and Permits: Many licenses and permits, whether local, state, or federal, require an EIN.
- Establishing Business Credit: An EIN helps you build a business credit profile, which is essential for securing loans and credit lines.
- Protecting Personal Identity: Using an EIN instead of your Social Security Number reduces the risk of identity theft.
An EIN streamlines your business operations, enhances credibility, and ensures compliance with legal and tax requirements.
Now that we know what an EIN is and what it is used for, let’s go ahead and apply for your own. No need to pay an agent to file the application for you. To know if you are illegible for your employee identification number, review the checklist below:
Step 1: Determine your eligibility. VIA IRS
- You may apply for an EIN online if your principal business is located in the United States or U.S. Territories.
- The person applying online must have a valid Taxpayer Identification Number (SSN, ITIN, EIN).
- You are limited to one EIN per responsible party per day.
- The “responsible party” is the person who ultimately owns or controls the entity or who exercises ultimate effective control over the entity. Unless the applicant is a government entity, the responsible party must be an individual (i.e., a natural person), not an entity.
Follow these steps below to get your EIN immediately:
- Visit IRS EIN scroll down past step 1, step 2, and step 3
- Click on the blue rectangle box that says ↓
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Apply online now
- Follow the instructions prompts that follow.
RE-CAP:
An Employer Identification Number (EIN) is a unique nine-digit identifier assigned by the IRS to business entities for tax purposes, similar to how a Social Security Number is used for individuals.
An EIN is essential for filing federal and state tax returns, opening a business bank account, hiring employees, applying for business licenses and permits, and establishing business credit.
It helps separate personal and business finances, providing a layer of protection and professionalism for your business.
For small businesses, an EIN is crucial for legal compliance, managing payroll and taxes, and securing loans or credit lines.
To apply for an EIN, ensure your business is based in the U.S. or U.S. Territories, and you have a valid Taxpayer Identification Number. You can apply online via the IRS website by following the prompts to receive your EIN immediately.
Additional Resources
Get your Taxpayer Identification Number To Represent Your Business
Is EIN FREE? – Employer Identification Number
*Disclosure: I recommend only products I would personally use, and all opinions expressed here are my own. This post may contain affiliate links, through which I may earn a small commission at no additional cost to you.
