When you are starting a new business, there are several things you will need to do before you can start conducting business transactions. All new businesses need to register with their state in order to be considered a legal business entity.
Furthermore, there are specific permits, licenses, and other registration requirements you may need. You can verify what ones you require with your secretary of state’s office and local county clerk’s office. However, one of the most essential registration requirements to complete is obtaining your EIN (Federal Tax Identification Number).
What is an EIN?
An EIN is a unique identification number issued by the federal government that is primarily used for tax purposes. However, there are other benefits of an EIN. It is nine digits long, similar to a social security number. However, when you file taxes for your business, you use your EIN, not your personal social security number.
Who needs an EIN?
Ideally, all business owners should obtain an EIN when they start their businesses. Even if you are self-employed or are a sole proprietor, it is beneficial to get an EIN. Other business entities are legally required to obtain one. You should get your EIN if any of the following apply:
- You intend to hire employees for your business.
- You intend to pay yourself by paying yourself a salary from your business.
- Your business requires state and local permits and licenses.
- You will conduct business with other organizations, such as nonprofit organizations, cooperatives, trusts, etc.
- Your business structure is a partnership, LLC, or corporation.
Benefits of an EIN Number
There are benefits of obtaining an EIN for your business regardless of the business structure you use, including:
1. It keeps your personal and business information separate.
You do not have to worry about identity theft because you are not using your social security number to conduct business with others.
2. It allows you to open business bank and financial accounts.
If you intend to open a separate business checking account, apply for small business loans, or apply for business credit cards, then you need an EIN. Additionally, an EIN may make your business eligible for certain grants.
4. You can build a credit profile and score for your business.
An EIN is treated similarly to a social security number, so you can start to build a credit history and score for your business. You can invest in an individual 401(k) retirement plan.
Your EIN allows you to open an individual 401(k) retirement plan that can provide better returns than other retirement accounts.
5. It protects your personal finances and assets if you go out of business.
If the unthinkable happens and your business does not do as well as you intended, you will not be putting your personal finances and assets at risk.
6. You need an EIN to obtain a seller’s permit for your business.
A seller’s permit is required in most states and is also called a sales tax license. Businesses that are required to collect sales tax will need to have their EIN first before they can apply for a seller’s permit.
7. You can get a wholesale permit for your business.
A wholesale permit allows you to avoid paying sales tax on any goods you intend to resell to your customers. Some states allow you to use your seller’s permit as a wholesale permit. In comparison, other states require you to obtain a separate wholesale permit.
8. It makes vendors and suppliers more likely to conduct business with you.
Vendors and suppliers tend to be more trusting when you have an EIN. Not to mention, as you establish a relationship with them, they are more likely to extend you credit or more favorable payment terms.
How FastFilings Can Help
FastFilings makes obtaining an EIN for your business easy, using our simple online application form. All you do is complete the requested information, and we take care of the rest. We will verify your information, fill out the application form, and electronically file it with the federal government.
If we discover any errors or require additional information, we will contact you before filing your EIN application. Usually, the entire application process takes about five minutes.
We can also assist you in obtaining your seller’s permit and wholesale permit using the same simple application process. We know which states allow you to use your seller’s permit as your wholesale permit and which states require you to obtain two separate permits.
We also offer rush processing when you are in a hurry to start conducting business. For further information or to get your EIN, seller’s permit, and wholesale license, fill out our secure online application forms today.
Do not hesitate to contact us directly if you have further questions or require additional assistance.