If you are planning to start a business in the US, and want to generate sales/receive payments, the terms EIN and ITIN will come up frequently. Therefore, it is useful to learn what they mean.
An Individual Taxpayer Identification Number or ITIN is a nine-digit number issued by the Internal Revenue Service (IRS) to individuals who must have an identifying number but who are not eligible for either a Social Security Number (SSN) or an employer ID number. ITINs are only for tax reporting purposes and they cannot be used for identification purposes.
An Employer Identification Number or EIN is a Federal Tax Identification Number issued by the Internal Revenue Service (IRS) to businesses. It allows you to open a bank account, conduct lawful business activities in the US for loans and hire US employees. Every entity that wants to run business in the US – even if outside the US – must have an EIN.
If you have a single partner Limited Liability Company (LLC) or sole proprietorship, you do not need to register for EIN. You can use your SSN for tax transactions. However, most single partner LLCs and sole proprietorships obtain an EIN in order to separate their company and their own tax liabilities. The EIN looks more professional than an SSN when doing business with third-party companies and contractors. Besides, the EIN gives information about your company whereas the SSN provides information about you. Therefore, we highly recommend you to get an EIN even if you do not have any employees. It helps to show that you are an independent company owner, and this may be more attractive to your prospective clients.
If you are planning to obtain an EIN or ITIN for your business or if you have any further questions about EIN and ITIN’s, please do not hesitate to contact us via e-mail, phone call or online chat.