The EIN Number i.e. Employer Identification Number is an identifier used by the IRS for businesses or other entities. Most of businesses need to have an EIN even if they do not have employees. For example, many banks require an EIN number before you can apply for a business checking account. EIN number is primarily used for employment tax identification purposes, an EIN number can also be used as a general tax number. The EIN number is used to identify your business in the US and you need one if you meet any of the following criteria –

• You employ staff for the business

• You operate your business as a co-operation or partnership

• You file any of the following tax returns as – excise, employment and alcohol, tobacco or firearms

• You withhold taxes on income other than wages and paid to offshore alien

• Your business is involved in any of these types of organizations such as trusts, estates, real estate mortgage investment conduits, non-profit organizations, farmer’s cooperatives and plan administrators

Basically, the EIN number is a unique nine-digit number that is issued by the Internal Revenue Service (i.e. IRS) that assigns every operating business in the US for the purpose of identification and taxes. In other words, an EIN number is an employee identification number just like a Social Security Number (i.e. SSN) is for a person, but an EIN number is for a business. For example, if you run a corporation, a limited liability company with more than one member or a business that hires employees, then you are most likely to obtain an EIN number.

 

Benefits of Having the EIN Number

EIN Number offers your various benefits regarding your business such as –

• It offers safety for the sole proprietors or individuals.

• EIN numbers help the companies to establish credit.

• It can help the companies to obtain all of the necessary business licenses and permits.

• Employer ID numbers help the companies to open a bank account using your business name, as the bank will require you to have an EIN number along with all of the other necessary information.

• EIN number help you in avoiding the tax penalties

• EIN numbers help you to prevent identity theft.

• Lenders need to have an EIN number when applying for business loans.

• If you are a freelancer, then filling out tax forms with an EIN number would prevent you from giving your Social Security Number to everyone who paid you.

• If you are a sole proprietor, then you could use an EIN number rather than your Social Security Number when sending 1099 forms to any contractors or freelancers you paid.

• EIN number helps you in preserving limited liability for single-member LLCs.