What is An EIN and Why is it Important?
What is an EIN and Why is it Important?
What is it?
An EIN is a unique nine-digit number that you obtain from the IRS for tax purposes. It is a number that identifies your business. Business owners need to have an EIN. It is needed for a variety of things such as filing your tax returns, opening up a business bank account, and applying for business licenses. Not having one may cause delays in obtaining licenses or getting the finances you need to open your business. It is recommended that you apply for one while planning your business.
Who Needs One?
If your business retains employees you need an EIN. But that doesn’t mean you don’t need one if you don’t retain employees. Non-employers need one if they operate as a partnership or a corporation. If you are a sole proprietor you may not need an EIN and may be able to use your Social Security Number instead. An EIN is required for sole proprietor if:
- you hire employees
- file for bankruptcy
- incorporate, form a partnership or limited liability company
- have a Keogh or 401 k retirement plan
- bought or inherited an existing business and operate as a sole proprietor
Even if you aren’t required to have one, it is still better than using your social security number because it helps to prevent identity theft. You should always keep your social security number private. It is better to give out your EIN than your social security number.
How to Apply for an EIN
To obtain an EIN it is easy and free. You can apply through the IRS website via their EIN Assistant tool. You can also apply via fax, mail or phone. Your EIN will be supplied as soon as your application is received and validated. To find out more information visit the IRS website.
Looking to start a business or grow your current business? Contact FL Patel Law today by visiting our website or calling 727-279-5037.