When filing all of your documentation to start your new business, you may have noticed something called an Employer Identification Number (EIN). If you’re not familiar with it, allow us to illustrate the importance of an EIN, particularly when you first start your company. Overall, it’s a necessary step that will allow you to do so much more with your business than you would without it.
What is an EIN?
Simply put, this is an identification number given to your company by the IRS for taxation and documentation purposes. It is the number that you will put on all of your financial documents as a way to reference your legal business entity.
Why Do I Need an EIN?
There are several reasons that this number is necessary when filing for a business, particularly depending on the type of entity you file as. Let’s break down the various ways that an EIN can come into play.
●Hiring Employees: If you plan on having a staff, you must have an EIN to do so.
●Legal Separation: If you want to keep your business separate from your finances (which you should), then an EIN creates a new legal entity for that purpose.
●Merchant Accounts: You won’t be able to get a company bank account without an EIN, as most financial institutions forbid people from using their personal Tax ID.
●Theft Protection: You don’t want to put your social security number on all of your business documents as it can make it easier to steal. With an EIN, you usually have additional protection in case of fraud.
How Do I Get an EIN?
Fortunately, it’s easier than ever to obtain an employer identification number, so you don’t have to worry about it being a lengthy or complicated process. All you have to do is find an online EIN application, fill it out, and then pay the fee. In most cases, you can get it on the same day as you file.
As you can see, an EIN is a necessary part of any new business, and you should get one as soon as possible. Regardless of your entity type, an EIN can help you out immensely and ensure your success.
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