When starting a business, it can sometimes feel overwhelming to align all the proper documentation and verifications for sucess. From filing for an LLC to getting a business ban k account or phone number, the process seems never ending. So how important is an EIN when choosing to start a business?
In this article, I feel break down what exactly and EIN number is and why you should consider getting one.
Let’s dive in.
What is An EIN Number?
An employer identification number (EIN) is a nine-digit number assigned by the IRS. It’s used to identify the tax accounts of employers and certain others who have no employees. The IRS uses the number to identify taxpayers who are required to file various business tax returns. In short, if you plan on having employee or filing taxes for your business it’s a best practice to obtain one.
I like to think of an EIN as a social security number for your business.
Benefits of an EIN
There are several benefits of obtaining an EIN for your LLC. Business owners can use an EIN on most paperwork in lieu of providing their personal social security number. This is an excellent choice for someone who is concerned about the possibility of identity theft, and many people use this method even if they aren’t legally required to obtain an EIN. An EIN also allows business owners to:
- Legally hire employees and implement a payroll system
- Open a business bank account
- File business taxes
Should I Get an EIN for My LLC?
There are many reasons why you might want to obtain an EIN for your LLC, even if you’re not required to have one. For example, many banks require LLCs to provide an EIN in order to open a bank account. Additionally, having an EIN can help you with tax reporting and other administrative tasks. You can apply for an EIN even though you’re not required by the IRS to have one.