After you have set up your business and you are ready to continue to the next steps, you may come across the term EIN online. EIN stands for Employment Identification Number and there may be the question lingering in the air ‘what is the purpose of an EIN number?’.
In this article, we will break down the following points of what an EIN does and the benefits it provides to business owners. That way, you can learn more about the purpose of an EIN, without any problems..
What is an EIN?
EIN (Employment Identification Number) is a government issued ID that also acts as a business ID. It is basically a Tax ID Number for a business and can provide many legal benefits that are needed. It is also known as Federal Tax ID and Tax Identification Number.
What can I do with an EIN?
Once you have formed your business and officially registered, you can obtain an EIN so that you can hire employees. Business structures such as LLC multi member, corporations, non profit organisations, partnerships and sometimes sole proprietors will need an EIN to hire employees. Sole proprietors only need it if they are hiring employees.
This of course is a benefit for your company, especially if you are looking to expand and hire plenty of employees for different job roles. It is something that cannot be avoided, but instead is a necessity to have for your business.
You can obtain a separate bank account
By having an EIN, you are given the golden opportunity to protect your financial assets, by opening a separate bank account. This means that should your company ever face any losses or lawsuits that can affect your assets, your personal finances will remain untouched. You can also manage and keep a record of your professional finances, which means that you won’t have any obstacles with your cash flow.
Can an EIN help prevent identity theft?
By obtaining an EIN, you are limiting the chances of identity theft. It can help protect your social security number even more in the terms of privacy and if you separate your personal finances from your professional finances, it gives less of a chance for hackers to break through.
It is added professionalism
For an LLC company especially it can play a beneficial role for your business, since an EIN can protect you from any liability in regards to the business’s debts. You are also adding professionalism and credibility to your company, by allowing your business to have its own separate identity that’s separate from its owners
You can get an EIN for free
As a new business owner, there is a high chance that you have paid for a huge amount of fees and expenses in order to get your business running. Well, luckily an EIN is actually free to obtain and it can be done online. If you simply just go on the IRS website and fill out the application form, you are on your way to obtaining an EIN. There is also an IRS EIN assistant to help you too.
Foreign business owners can get one too
Even if you are not a U.S. citizen but you are a business owner, you can still obtain an EIN. The application process is different, since you have to download and fill out the form instead. It is still sent to the IRS and it is also free. There is a guide available online for this.
Read More: How the employment attorney law can serve?
Build business credit and qualify for more loans
As a business owner, you may face financial obstacles that you would need to overcome. The solution for this is to be prepared by having the right credit in order to be eligible to take out any loans when needed. By obtaining an EIN, it is a door opener for you, since it gives you to credibility to work towards building your business credit and making you eligible to apply for loans.