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What is EIN and Why is it Important as a Business Owner?

As a business owner or even as an aspiring successful entrepreneur, knowing the requirements on building and legalizing your business is a major need for you to take note of. You might always think about the registration process, business permits, and licenses among others but have overlooked understanding what an Employer Identification Number is.

Whatever your business structure is, you will be needing an EIN for your business. Ideally, this will provide you the ease in order for you to have organized business management. To fully guide you, check out this article:

What is an Employer Identification Number (EIN)?

Also known as Federal Tax Identification Number (FTIN), Federal Employer Identification Number (FEIN), or Tax ID Number, an Employer Identification Number (EIN) serves as a social security number in order to segregate your personal to business tax return, hire employees, or open a business bank account. It is a nine-digit number that is unique for every business registrant issued by the Internal Revenue Service (IRS). 

Why is it Important for you as a Business Owner?

As mentioned, having an EIN will allow you to separate your personal to business tax returns, hire employees, and open a business bank account. 

Acting like a social security number (SSN), the EIN is also used for the government to identify you, not just a resident in the state, but as a business owner. Yet if SSN is sensitive information, an EIN is not as it could be freely distributed from many means like publications, the internet, and other media or mode of communication.

For the IRS, an EIN is quite essential for them to locate the taxpayers, as a business owner, from which is required to file several business tax returns. Moreover, financial establishments or institutions such as credit unions, banks, and brokerage houses could never open an account with the EIN.

To operate your business, whatever its structure or entity, it is compulsory for you to apply for  an EIN that could be done through phone, fax, the web, or by mail. Any type of businesses such as non-profit organizations, sole proprietorships, general proprietorships, limited liability companies (LLCs), government agencies, and estates among others could apply for this.

Also, take note that the size of the company or business has nothing to do with the rules of IRS on acquiring an EIN. A single owner of a business, such as sole proprietorship businesses, could obtain an EIN.

How much will be the cost of an EIN?

The EIN for LLC cost is free, even for other types of business structures such as sole and general proprietorships, as well as S and C corporations. Though if you opted to acquire your EIN through companies that offer formation services, this will require you to pay fees.

How to Acquire an EIN?

You could apply for it in your state in the appropriate office. You could also apply to it online by looking for the EIN form of the IRS website. The form could also be filled out and submitted digitally or electronically. Many formation companies also offer EIN services. The EIN you have applied for will be specified to you shortly once all the information needed is being confirmed or validated.

Acquiring EIN for your business is necessary to protect your business as well as yourself as the business owner from financial related problems. This will also serve as the safety net of your business. Failing to comply in acquiring an EIN might result in facing legal problems.