The IRS does not require all businesses to have an EIN, or employer identification number. This leaves those who have the right to choose, which includes sole proprietors and LLCs taxed as sole proprietors who do not have employees, wondering what the benefits of obtaining an EIN are. With an EIN, your business is able to do the following actions.
Hire Employees and Independent Contractors
The main reason for an EIN is hiring employees. It is important to note that you also need one if you work with independent contractors and pay them more than $600 per year, including any benefits. Thus, if you plan to need additional workers for your business, you will want to have an EIN. Applying for one when you first open your business gives you more flexibility down the line when you decide to bring on more work, including temporary workers during a busy spell.
Protect Your Identity
When you perform a lot of work with different vendors, clients or other businesses, you might have to put your social security number on a lot of different contracts and forms. With an EIN, you have a way to protect your own personal identity.
Bank and Credit Cards
Many banks, credit lenders and financial institutions require an EIN for businesses to open a bank account, credit card or another line of credit. You might be able to find a bank that will let you open a business account with your social security number, but you will have many more competitive options if you choose to get an EIN.
Obtain Business Permits
In some areas, you might need to have an EIN to obtain your business permits or licenses. If you do not have one when you initially apply for these permits, you might experience a delay in your ability to legally perform your work.
It is easy to apply for EIN online, making it a simple step in your list of things to do when opening your business. If you are wondering how to get an EIN in Colorado or another state, then contact IRS-EIN-Tax-ID Filing Service to find out more.
