It is the employer identification number or also called the Tax ID number. It is the social security number of your business. This usually requires a bank account opening for any business to pay appropriately and account for payroll/wage to your company’s employees.
What is the Employer Identification Number (EIN)?It is also known as the “Tax ID number.” EIN is a federal tax ID number of a business that works like the Social Security Number of your business. EIN is generally required to open a bank account according to your business’s name, and it also helps you file a tax return for your business. Moreover, it helps you pay wages and payroll to your company employees and otherwise helps establish your business credit and maintain your business standing as a legal entity.
Why do you need Federal EIN for your Business?Generally, if you are a company owner with no employees and no other separate legal entity, you need to get an Employer identification number. Suppose you own a business with single-member LLC and simple accounting. You can get EIN by using your Social security number for tax and receiving all your clients’ payments. The most specific business also benefits from EIN, as it serves as a tax ID for your other corporate entities. The following business entities should get an EIN confirmation letter:
- Multiple-members LLCs: In this type of business, you need an EIN whether you have employees or not.
- Single-member LLCs: If you have any plan to have employees within next year, you will need to have an EIN. Even if you are a single-member LLC and have no employee and you have a plan of getting EIN with your personal Social Security Number for tax is a good idea. Because many banks and loan providers will use EIN to do business with you.
- Partnerships: It is required for limited partnerships and all general partnerships.
- Sole proprietorship with employees: If you run a sole proprietorship and don’t have an LLC or any other entity of your business. It would be best if you still got EIN even you don’t have any employees, but you have a plan to hire employees soon.
- LLC taxed as a Corporation: If your business chooses to be a corporation taxed, you need EIN.