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The Free Financial Advisor

You are here: Home / Personal Finance / 5 Benefits of Having an EIN

5 Benefits of Having an EIN

August 15, 2018 by Susan Paige Leave a Comment

Your Internal Revenue Service – Employer Identification Number – Tax identification number or your IRS-EIN-Tax-ID is very easy to obtain. You can apply for this nine-digit number via a very easy five-minute process online or via fax.

Top 5 Benefits

To Establish the Legitimacy of Your Business With the IRS

Your EIN number is the easiest way that the IRS can confirm your identity as a business entity. It goes directly to establishing the legitimacy of your business. This is the top benefit of acquiring your EIN.

Through the course of your business, you will have to deal with the IRS a lot of times – at least once a year to pay your taxes — or to declare why you won’t be paying your taxes. It would be such a hassle if you have to prove the legitimacy of your business every time you have a transaction with them.

To Protect Your SSN

Your business entity is legally required to use your Social Security Number (SSN) or an EIN to conduct all transactions.

Like the EIN, your SSN is also a nine-digit number. However, the SSN is associated with you personally. Thus it would be dangerous if many people knew about it. If people knew your SSN, there would be a few transactions that they could make on your behalf.

That is why sole proprietors, while allowed to use their SSN for their official documents and transactions, are now also given the option of applying for and using an EIN instead.

To Apply for a Business Permit and to Hire Employees

Your business permit is another important document. It tells your customers that you have fulfilled all the requirements that the government has set for business entities. It certifies the quality and safety of your products. You cannot obtain your business permit without your EIN.

An EIN also allows you to hire quality employees who will help you expand your business.

To Apply for a Loan or for a Credit Card

Aside from the IRS, your business also needs to establish its legitimacy with the bank and other financial and lending institutions. This is important because there will be many transactions you will need to make with the bank.

Using your EIN, you may open a bank account; apply for loans, establish corporate business credit or apply for a credit card; establish pensions, retirement, or trust plans for your employees; and purchase another business.

To Make All Tax-Related Transactions

Let us expound on the importance of establishing your legitimacy with the IRS.

First, you need an EIN to file your tax return, specifically paying federal taxes online and filing annual tax returns. It is also needed to establish that you are qualified to withhold taxes.

To Create a Trust, Estate, or Non-Profit

Sometimes, your business has the capacity to branch out to give back to the community. You would think that the government would allow you to do this with the thanks of your fellow countrymen. You would be wrong. For this, you would still need to learn how to get an EIN for a trust, estate or non-profit.

So all in all, your EIN is not only beneficial but in fact essential to exist as a business entity.

 

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