Unless you are engaged in any kind of business activity, there is a chance that you have not heard of an Employer Identification Number (EIN). The typical use of EINs is for the easy recognition of specific employers. The Internal Revenue Service (IRS) assigns each business an EIN the moment they register. Think of EINs as Social Security Numbers (SSNs) but for entities that employ individuals including companies and businesses.
What most entrepreneurs do not realize is that it actually also has benefits for the business. These are three of the benefits that your business will have if it has an EIN:
EINs Are Legal Requirements For A Company’s Tax Filings
Is your business a limited liability company (LLC)? Are you planning to incorporate your eCommerce business? If one of those questions nets a “yes,” using your EIN number is the best arrangement for your company.
See, when your business is an LLC, it is now already a separate legal entity. This means that owners will be treated as employees, minimizing your answerability to the company’s debt and liabilities.
LLCs and incorporated entities are required to utilize EINs because it enables the IRS to track the business. They will be able to tell if a company is paying payroll tax through this. Even when only one person is operating the entire incorporated business, the company is still legally required to have an EIN. Otherwise, the business may be committing a violation of business legislation.
Businesses that run on a partnership structure also benefit from EINs because technically the SSNs of either of the owners cannot be used.
EINs Protect Your Social Security Number
For easy identification of your business, entrepreneurs are legally required to utilize their EINs or SSNs. The use of SSNs is especially common among sole proprietorships as the business only has one owner.
However, since using SSNs on public documents makes you prone to identity theft, more entrepreneurs are increasingly convinced that EINs are the best option. At least with EINs, you are assured that you will not encounter any potential difficulties later on.
If you run an eCommerce business, it may best for you to start using EINs too. If you will be using your SSN on forms and documents, you are better off having an EIN just to be sure and safe.
The great thing about EINs is that you do not have to tiptoe in using it really as it does not pose as a big entry point for identity theft. It is only mainly used as a federal identifier.
EINs Have Diverse Uses For A Business
There are a lot of uses for EINs for your business. First of all, some financial institutions require an EIN for you to be able to open a bank account. Lenders may also make an EIN a requirement before they allow LLCs and corporations to borrow money for their operations.
One of the best things about EINs is the fact that they do not expire. It will be a constant for the business all throughout its operations.
As already mentioned above, EINs are also useful for anything related to taxes. This includes paying federal taxes in online platforms and filing yearly tax returns.
It is also helpful when the business decides to purchase another company. Bigger companies usually have the power and money to buy another company. Having an EIN ready facilitates an easier purchasing process.
Apart from all these, EINs are also useful in establishing pensions and trust funds. It is also needed when you want to change the organization type of the business and when the company will build on corporate business credit.
So, to have these benefits, you need to know how to apply EIN online. You need to do your research to know the exact process of getting it for your business. But online application makes it very easy and simple for anybody.