My blog focuses on Financial Literacy/Money and Business/Entrepreneurship. If you’ve started a business and it is ready for the next stage, you will want to acquire an EIN number. This will allow you to unlock the multiple financial benefits of a business. The following contributed post is entitled, Benefits of Obtaining an EIN for Your New Business.
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So you’re starting your new business, doing your due diligence, and wondering if you need an EIN. Your EIN is your employer identification number, and you know this. You know what it’s for but are unsure if you need one.
The IRS has strict rules around who does and doesn’t need an EIN, and not all businesses need one, especially solo proprietors or single-entity LLCs. However, obtaining an EIN can bring several benefits, even if you’re not legally required to have one. It can enhance your business’s credibility and trustworthiness, and it can help you access credit when needed.
Why? This post will look into some of the reasons you need an EIN.
Hiring Employees
The first and most obvious answer to the question, ‘Why do I need an EIN?’ is that you are hiring employees. You are becoming an employer, and as such, you need an employer identification number so the IRS can identify your business via this unique number. If you don’t have this number and are hiring employees, you’re not just breaking the law but also putting yourself and your business at significant risk. This risk is not something you can afford to ignore.
Opening Business Bank Accounts
Opening a business bank account requires you to have an EIN, as does obtaining business credit too. For instance, having an EIN can help you secure a business loan or a line of credit. Even if you’re not taking on employees, this number is more than just a requirement. It legitimizes your business, making it more credible and trustworthy. It can help you remove any barriers to obtaining credit to operate for your business. If you need help doing this, you can use an ein filing assistance service to help you make sure you’re applying correctly.
Filing Business Taxes
If you file certain taxes for your business, such as employment, alcohol, tobacco, or firearms, you need an EIN, even if you don’t have employees. There are few businesses that are exempt, but even for those, it’s necessary to have something other than bypass it altogether.
Retirement Plans
Even as a sole proprietor, you need an EIN if you are looking at building a retirement nest egg via a Keogh or a solo 401(k). This allows you to access the federal tax plans concerning both structures to avoid future complications.
Other Structures
If you’re going to be setting up any of the following, then you need an EIN to ensure you are meeting your legal obligations, and these include
● Trusts
● Nonprofits
● Estates
● Real estate mortgage investment conduits
● Plan administrators
● Farmers cooperatives
While you might not, in the first instance, understand if you need an EIN or the benefits if you’re not hiring employees, it can be worth doing a little bit more digging to uncover the benefits of having an EIN and why you need one. The more informed you are, the better the decisions you can make and the more mistakes you can avoid making.
