It is a myth to think that you only need a great idea to start a Business. A lot of people underestimate the work that goes behind building a solid business. All those minute details, annoying paper works, and incessant payables are part of the job. One critical thing that you need to have before you embark on this adventure is an Employer Identification Number or EIN. You need it to get financing, start a credit and to create jobs. Applying for an EIN is fairly easy and you can do this online, by fax or mail. If you chose the easiest way to apply online, just visit federal-tax-identification.com and you will find everything you need to know.
Before you set this aside, EINs can offer you a lot of benefits. Here are four reasons why getting an Employer Identification Number (EIN) is critical to your business:
1. It is Required by the IRS for the Annual Tax Statement
To be a legitimate business and have the right to operate and pay employees, you are required to get an Employee Identification Number or EIN. If you file an employment, excise, alcohol, tobacco or firearms tax return, you need to apply for an EIN. If you plan on withholding taxes on income to a non-resident alien, you need to apply for an EIN. Even if you don’t have employees but you are planning to sell your services to other businesses, you still need to an EIN. For other necessities such as taking a loan and applying for a corporate credit card, government licenses, and permits, an EIN is still very much needed.
2. EIN Helps Separate Your Business from Your Personal Finances
As a business owner, you need to track your business expense separately from your personal expense. Financial institutions such as the IRS, banks and collection agencies will use your EIN as references on how much revenue you earn, how much cash goes into the operation and paying salaries, etc. Having your business finance separate from your personal finance ensures that there is no overlap and you can make a fair and clear assessment whether your business is making profits or not without sacrificing your personal savings.
3. It Keeps You from Being Liable for the Business’ Debts and Obligations
Having an EIN protects you from being personally liable for your business’ debts and obligations. In case of financial difficulty, you have limited liability and banks or collection agencies cannot easily oblige you to put up your personal saving as collateral for your business unless you agreed. When you negotiate for feasible terms, financial institutions will look at the history of your business to assess if it’s good for the money.
4. It Helps Protect Your Identity
When you start your business operation, there will be many occasions when you need to provide your identification number. Providing your EIN instead of your social security number lessens the threat of identity theft. When you start to expand your business, you need your EIN to obtain debt financing. In a way, an EIN gives you the business license to conduct negotiations with suppliers, distributors, and buyers.