As a new business owner, there are a lot of different forms and paperwork that you have to fill out to ensure that your company is both legal and recognized by the government. One of the processes that you have to go through is obtaining an EIN number, also known as an Employer Identification Number. If you’re not familiar with this process, you may wonder if it’s entirely necessary. Therefore, let’s go over the reasons to obtain an EIN and the times where it may not be required to start your new business.
What is an EIN?
Simply put, this is a tax ID number given to you by the government so that when you file your company’s taxes, it will be connected to the right place. While individuals have their own number (social security), businesses are taxed differently and therefore need a different classification.
Do I Need an EIN?
The short answer to this question is yes, but there is a particular circumstance under which you wouldn’t. For the most part, EINs are necessary to have a business as they allow you to do things like open a merchant bank account, hire employees, and form certain types of companies.
If you are starting a new company and you never plan on hiring anyone else, and you don’t want your business to be separate from yourself, then you can use your own tax ID number (social security) instead of an EIN. However, this is severely limiting, so even if you are going to have a sole proprietorship, you will want to get the number so that you have more flexibility and your personal assets aren’t directly tied to the company.
How to Get an EIN
Fortunately, the process for obtaining an EIN is remarkably simple. All you have to do is go to a website like www.govdocfiling.com, and fill out the requisite paperwork and submit it with any applicable fees. In many cases, you can get your EIN number within an hour.
Overall, when starting a new business, it’s necessary to get an EIN if you want to open a bank account, open a merchant services account, and even file taxes as a business.