Whether you’re an entrepreneur or business owner, an Employer Identification Number (EIN), also known as a Federal Employer Identification Number (FEIN), is a key part of your business arsenal. This nine-digit number, which is quite similar to a social security number, is used to identify your business for tax purposes.
If you have a limited liability company (LLC), it is not mandatory, unless your LLC business has employees or multiple members, but it does provide credibility. Not having one may cause delays in obtaining licenses or getting the finances you need to open your business. However, your LLC needs to be registered before you can apply for an EIN, as you will need to submit the business’s legal name and its date of inception.
With your EIN, you’ll be able to tick all the required boxes of a legitimate business, while also being privy to the type of start-up capital typically required to get a business up and running. It will enable you to file your tax returns, apply for a business license, and open up a business bank account. It also separates your personal finances from those accrued by way of your business. You may not plan to go under, but if you do, you’ll need an EIN to assure personal assets are protected from business losses
If you have to pay payroll and Federal Insurance Contributions Act taxes to employees, even if it is only temporary help you hire through a business rush, the EIN allows you to make payments to state and federal agencies and assures you earn credit for the amounts paid.
An EIN is required by credit card companies to create a business account. This launches a commercial credit report, which can help boost your chances of good loan rates from vendors and creditors.
The EIN is provided by the IRS. The IRS issues a printable copy of EIN information you can take to the bank or provide to license boards, clients, and vendors.