Getting an EIN number may help people figure out what your business is. In order to do business, most businesses need this federal employee identification number. An EIN is a unique nine-digit number for your business or non-profit. It’s the social security number for your business.
For tax purposes, the IRS uses this number to find your business and link it to the right business name. It’s not enough to have a distinctive company name; EIN registration is also important.
Having an EIN also makes sure that your business follows IRS rules and that your tax returns are accepted. On the other hand, it also makes it easier for you to run your business.
The EIN registration requirements are highly specific and are required to show that a business is recognized as a tax-paying entity. To register a business credit card, open a company bank account, and file business taxes, you’ll need an EIN registration number, often known as an Employee Identification Number or a Federal Income Tax Identification Number. It is no longer necessary to use a personal Social Security number.
Reasons you may require an EIN registration number:
Some of the reasons you may need an EIN registration number are as follows:
- When the company employs its employees.
- The business is either a corporation or a partnership.
- For income tax or other reasons, the corporation deducts money from a non-resident alien’s profits.
- If a person manages a trust, estate, farmers’ cooperative, real estate mortgage investment organization, or plan.
- If you file excise, tobacco, alcohol, firearms, or employment taxes.
Where to use EIN:
Many important business operations require the use of an EIN, including:
- The process of opening a bank account
- One of the documents that must be kept track of is invoicing, which allows a company to pay invoices and collect debts.
- Recruiting new employees.
- Taxes must be paid and tax regulations adhered to.
- Although the IRS uses the EIN for federal tax reporting, several states also require firms to get a state-level Tax Identification Number.
How can I obtain an EIN?
The IRS doesn’t charge anything to get an EIN. You don’t have to pay someone else to do it. But the process isn’t always easy or quick, so get started as soon as possible. Businesses can now get an EIN tax ID online instead of by fax or mail, which used to be the only way to get one. The IRS makes it easy to get an EIN and to apply for one. There are several ways to apply:
- By fax
- Over the phone.
Therefore, make sure the input data are completed accurately when filling out the form:
- The formal name of the company.
- The entire legal name of the applicant.
- Include a trading name if it applies.
- The company’s mailing address, street address, country, and state are all provided.
- Name and Social Security Number (SSN) or Employer Identification Number (EIN) of the responsible party (EIN)
Moreover, you must also include the following information:
- What type of business entity is requesting an EIN?
- The number of members if you’re applying as an LLC.
- The state or country where you were formed if you’re applying as a corporation.
- The date the company was formed or purchased.
- The anticipated maximum number of employees in the next twelve months, as well as the first day of pay.
- The main activity of the company.
What are the benefits of having an EIN?
In some ways, an EIN is one of the biggest secrets in the business world. Unfortunately, not every business owner has it on their list of things to do. However, there are some benefits of having EIN by NY Biennial Statement Online. Following are:
1. By filing your business taxes, you might avoid paying penalties.
If you were supposed to get an EIN but don’t have it by tax day, you must fill out more paperwork to let the IRS know. If you forget to do this, the IRS may not accept your tax return, and you could be fined for filing late.
2. Protect yourself against identity theft.
You might be surprised to learn that getting an EIN can help you avoid identity theft. An EIN is a number that separates your personal and business funds.
3. Increase your credibility as a freelancer or independent contractor.
Even losing one customer can make a major financial difference for freelancers and independent contractors. You’ll want to go to great lengths to portray yourself as a trustworthy business owner. However, having an EIN lends you greater credibility and demonstrates that you’re running a legitimate business rather than a hobby.
4. Accelerate the processing of business loan applications.
According to Legal Founders, if you have an EIN, you can accelerate the process of applying for a business loan. The vast majority of lenders do not insist on one. But having an EIN registration helps you a lot in getting loans.
5. Create a bank account for your company.
While some banks will allow sole proprietors to open a company bank account without an EIN, others will refuse. Therefore, creating a bank account is easy while having the EIN.
6. It builds trust with Vendors.
It’s impossible to do everything on your own as a small-business owner while growing your firm. To reach your objectives, you frequently need to rely on vendors, suppliers, and business alliances. Third parties are more inclined to cooperate with you if you have an EIN.
7. Creating a credit rating for a company
An EIN is required to establish a business credit history. Your private credit history is very similar to your corporate credit history. Instead of evaluating your financial habits, business credit evaluates your company’s history of bill payment and financial prudence.
Do you ever need to change the EIN?
When you receive your EIN from the IRS, it takes effect immediately. You can use it straight away to apply for loans, open a bank account, or give it to a vendor. In most cases, your EIN will follow you throughout the life of your business.
If the structure or ownership of your firm changes, you’ll need a new EIN. You’ll need a new EIN if you start out as a sole proprietor and later decide to incorporate.
For some businesses, an EIN is a legal requirement. Other businesses do not need an EIN, although there are strong reasons to do so. In fact, obtaining an EIN will present you with several advantages. The good news is that getting an EIN is completely free and takes only a few minutes.