When you open a business credit account, you have the ability to apply for larger credit limits than personal accounts typically allow. You also have the opportunity to earn points and receive other business-specific benefits.
These numbers are nine digits and are used to identify individuals. Like SSNs, they are also nine digits long, but are formatted differently. Every business that files business tax returns or pays employees must obtain an EIN. This is especially true if your business does not yet have a well-established credit profile. Need help getting your EIN number?
For some businesses, an EIN is a tax requirement. In fact, there are some distinct advantages you stand to gain by applying for an EIN. And the good news is that applying for an EIN is free and takes just minutes. Many people associate EINs with big corporations, but even a freelancer or the owner of a very small business might need an EIN to file business taxes and for other purposes. If you do need a business tax ID, the best practice is to get one as soon as you open your business, as part of your business launch checklist.
The following types of businesses must get an EIN for tax purposes:. Any type of business entity with employees including sole proprietors. Corporations and any entity taxed as a corporation.
If you buy a business or inherit a business. If you have a Keogh plan or solo k retirement plan. But there are plenty of reasons to get one anyway. Generally speaking, having an EIN helps you separate your personal finances and personal life from your business.
Often, foregoing an EIN now can cost you time and money down the line. If you forget to do that, the IRS might not accept your filing, and you could face penalties for a late return. Plus, for certain types of tax deductions, such as home office deductions, your chances of an IRS audit decrease if you have an EIN.
Why not make your case before you have to? You might be surprised to learn that getting an EIN is an effective way to help prevent identity theft. An EIN separates your personal finances from business finances. Instead, you can provide your EIN. Providing your EIN means you can keep your Social Security number more private, lowering the chances of a thief stealing it and getting access to your hard-earned profits. For freelancers and independent contractors, losing even one client can make a big financial difference.
You want to do everything you can to cement your status as a legitimate business owner. That they can quit at any time, no big deal. These accounts will most likely have very small limits and be "30 day" accounts, meaning you must pay the bill within 30 days. Pay these on time. Make sure that the lines of credit will be reported to the credit bureaus ask the lender before borrowing.
It's vital to keep the initial accounts in good standing. The more accounts you pay on time, the higher your credit score will be, and the more credit you'll be able to apply for using your EIN instead of your SSN. Please reference the Terms of Use and the Supplemental Terms for specific information related to your state. Grow Your Legal Practice.
Meet the Editors. When EIN Is Required for Sole Proprietors If you're a sole proprietor, you must have an EIN to: hire employees have a Keogh or Solo k retirement plan, buy or inherit an existing business that you operate as a sole proprietorship incorporate or form a partnership or limited liability company , or file for bankruptcy. There are two good reasons to use an EIN instead of your Social Security number: Avoid identity theft Theft of taxpayer's identities has become a rampant problem--identity thieves steal taxpayer's Social Security numbers and use them to file fraudulent tax returns and obtain tax refunds.
Help Establish Independent Contractor Status Using an EIN on your tax returns and payments also helps to show that you're an independent businessperson—in other words, an independent contractor and not an employee. Talk to a Tax Attorney Need a lawyer? Start here. Practice Area Please select
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