EIN is an abbreviation that stands for Employer Identification Number. It is also known as the Federal Employer Identification Number (FEIN). EIN is a unique, nine-digit number that is issued by the Internal Revenue Service (IRS) in order to assign to every business operating in the United States for the purpose of identification and taxes.
The EIN or FEIN functions as your business’s social security number. You have to keep your personal finances separate from your business, so you will obtain your own personal tax number along with having a business tax number. Your business EIN number will help you with the issues below:
– Filing taxes for your business (legal requirement)
– Opening a business bank account
– Protecting your identity by avoiding giving out your personal social security number to clients.
When do I need an EIN as a Sole Proprietor?
Employer Identification Number (EIN) is required to obtain by business entities such as corporations, partnerships, and limited liability companies. However, most of the time, sole proprietors do not need to have an EIN number. They can use their own social security numbers instead of using an EIN. But we still advise you to obtain an EIN. There are some moments that obtaining an EIN as a sole proprietor is a must also. The following is when you are required to apply for an EIN:
– If you are a sole proprietor, you must apply for an EIN to hire employees
– Having a Keogh or Solo 401(k) retirement plan
– Filing for bankruptcy
– A partnership or limited liability company formation or incorporation
– Opening a business bank account as some banks require you to have an EIN
At Delawarefile.com, we highly recommend you to obtain an EIN even if you are not required to. Obtaining an EIN will put you in advantage in terms of avoiding any identity theft and helping to establish an independent contractor status. This means that using an EIN for your tax payments helps to show that you are an independent company owner. This may be more attractive to your clients.
The process of applying for an EIN might be really confusing and complicated for you. At this point, you can always trust us and our service. Our assistance and support service is here for you no matter where you are.
If you have any further questions, please do not hesitate to contact us via phone call, e-mail or online chat.