An employer identification number, commonly shortened to EIN, acts as a Social Security number for your company. The IRS tracks business taxes with EINs, just like it does for personal taxes with Social Security numbers. However, not every company technically needs an EIN. However, that doesn’t necessarily mean you should avoid getting one, because there are reasons why applying for an EIN is beneficial for any business. Here’s why you should apply for an EIN.
It Is Required for Most Business Entities
When you incorporate your business, run a partnership, or form an LLC, it becomes its own legal structure. Just like every person needs a unique Social Security number, each legal structure needs an EIN. Even if you aren’t legally required to get an EIN, like if you’re a sole proprietor or single-member LLC, you’ll probably need one eventually.
No matter your business entity, whenever you hire an employee, you’ll need an EIN. This is because you become responsible for withholding taxes from your employee’s income and the IRS needs to track that income separately from your SSN. Getting an EIN allows the IRS to determine what your business needs to send in payroll taxes.
Opening Banking Accounts and Credit Cards
If you’re going to open a bank account to deal with your finances or a credit card for your company, you’ll probably need an EIN. Most banking institutions and lenders require you to have an EIN to open an account. This is a great way to keep your business finances separate from your personal finances.
Even if you don’t technically need an EIN, it’s a good idea to get one. If you’re thinking about getting an EIN, the process is simple. Applying for an EIN online is easy with IRS-EIN-Tax-ID.com. If you have any more questions, you can contact the IRS EIN Tax ID Filing Service team.