How to Get an EIN
Nearly every business owner should obtain an Employer Identification Number (EIN) to conduct business. Only sole proprietors are not required to obtain an EIN. An EIN is necessary to file taxes, to open a bank account or to get a credit card. An EIN is similar to a social security number for a business.
The Difference Between an EIN and a SSN
The SSN is written in the form of 000-00-0000. An EIN is written on the form of 00-0000000. Credit bureaus and issuers can detect fraud easier when these numbers are used. An EIN is distributed via the Internet or by phone to help businesses avoid fraudulent activities. An EIN decoder can help people determine the state in which the EIN number was registered.
A company with employees will need an EIN to pay them. When employees file taxes, an EIN is used to identify the company on the tax returns. A business license may be obtained immediately after the federal tax ID number is issued. This license is essential to the legal operation of many businesses. An EIN gives the business owner the right to conduct certain business transactions.
Why is an EIN Important?
Any item business owners want to obtain in the business’s name requires an EIN. If the business desires to establish phone service, an EIN is required. If sales taxes are collected at a business, the owner should have an EIN or a federal tax ID number.
Bank accounts and credit cards also require an EIN. This practice holds the business accountable rather than an individual. The business credit score will increase or decrease based upon the company’s payment history. Businesses file taxes to report earnings and deduct expenses. The EIN identifies the business.
Businesses set up as a sole proprietor may use the company’s social security number instead of using an EIN. With a sole proprietorship, the business owner’s personal credit is damaged if the business defaults on a loan. Personal bankruptcy along with business bankruptcy can be debilitating.
How to Obtain an EIN
The EIN may be obtained via the IRS. Business owners simply fill out IRS form SS-4. The form may be obtained at http://www.irs.gov/pub/irs-pdf/fss4.pdf. The entire process can take 15 minutes and is free if the owner completes the form without assistance. The IRS does not charge to obtain an EIN. Other incorporation companies may charge up to $100 for the service. The EIN will be administered instantly after application is complete. This process may occur via the phone or online.
Businesses can remain in compliance with the IRS by obtaining an EIN. An EIN is essential to most business transactions. An EIN will protect business owners and give the requesting organizations confidence in the business’s ability to meet obligations. The process only requires a minimal amount of time to obtain, and it is usable immediately. Business owners should obtain an EIN as soon as possible.
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