Everything You Need to Know About Applying for an Employer Identification Number (EIN)
There’s a lot to consider when delving into the world of business ownership including opening a biofeedback practice — like deciding on the best legal structure, choosing a funding strategy, and selecting the right office location for your small business. You may also need to obtain an Employer Identification Number (EIN), as these nine-digit codes are often required for tax and banking purposes.
Even if an EIN number isn’t required for the type of business you’re running, there are several important benefits to applying for one — especially if you wish to open a business bank account or apply for certain types of business licenses. Check out the following article from the Solano County Black Chamber of Commerce to learn everything you need to know about applying for an employer ID number, including the benefits of doing so.
As a type of tax ID number, an EIN is a unique identification code that’s similar to a Social Security Number (SSN) — but for businesses and non-profit organizations. These numbers are used to identify businesses for federal tax purposes, and in some cases, state taxes. Other types of tax ID numbers include SSNs, Individual Taxpayer Identification Numbers (ITINs), Preparer Tax Identification Numbers (PTINs), and Adoption Tax Identification Numbers (ATINs).
Not all businesses need to apply for EIN numbers through the Internal Revenue Service (IRS), but many do. According to the IRS, businesses are required to obtain an EIN if they:
- Operate as a partnership, corporation, or non-profit organization
- Plan to hire employees
- Have a Keogh retirement plan
- File any of the following tax returns: Alcohol, Tobacco, and Firearms; Employment; or Excise Tax
- Have any involvement with certain types of trusts, estates, plan administrators, farmers’ cooperatives, or real estate mortgage investment conduits (REMICs)
For other types of businesses, it’s still a good idea to obtain an employer identification number — even when they are not required. DoughRoller notes that EINs are often needed to open a business bank account, secure business financing, and apply for business licenses — so even limited liability companies (LLCs) and sole proprietorships can benefit greatly from obtaining one. Also, keep in mind that securing financing for your business could be dependent upon your credit score, so take a look at your report to see if there’s anything you need to address.
As mentioned above, biofeedback practitioners operating as limited liability companies and sole proprietorships can benefit from obtaining an EIN — even if they don’t need one for federal and state tax purposes. As 20 Something Finance explains, these numbers help to protect SSNs from instances of identity theft, keep personal and business finances separate from one another, and add an extra layer of professionalism to LLCs.
If you’re starting a new business as a sole proprietorship or LLC, before registering a business name or opening a business bank account, sole proprietors and owners of LLCs should consider applying for an EIN — as doing so will help to reduce their risk of fraud. Because sole proprietorships are so easy to set up (as the only owner you’re automatically considered a sole proprietorship), it’s the most affordable method for structuring your business — very few costs are associated with the process. If you need some direction on how to launch your venture, check out a guide on starting a new business.
Now that you’re familiar with EIN numbers and their requirements, you should know that Employer Identification Numbers are free to obtain and can be applied for through the IRS. In most cases, you may apply for an EIN online if your business is located within the U.S. and you can provide an SSN, ITIN, or another employer ID number. After submitting your online application, you’ll receive your new identification number and can begin to use it for any of your business-related needs.
If you can’t apply online, you may submit your application by mail, fax, or telephone. You’ll need to complete the official SS4 form to mail or fax your application to the IRS, or call 800-829-4933 to apply by telephone.
Fortunately, getting a tax ID number is simple, fast, and free. For how simple the process really is, there are no real disadvantages to filing for an EIN — and having one will protect you from fraud, simplify your business taxes, and boost your credibility as a business owner, entrepreneur, or solopreneur.
To learn more about a supportive organization dedicated to building black businesses, visit the Solano County Black Chamber of Commerce website today!
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