Why Do I Need an EIN (Employer Identification Number)?
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Employer Identification Number (EIN) - a unique 9-digit numeric identifier assigned to businesses.
To put it simply,
- Individuals get a Social Security Number (SSN)
- Businesses get an Employment Identification Number (EIN)
Your EIN is an identifier that is attached to your business only. It will be used frequently as you start your business journey. You will likely be asked to provide it on applications for business banking, business loans, for filing your taxes and even wholesale vendor websites in some cases.
When you file your taxes yearly, your job or a previous job you've had will have their EIN number on the w-2 form in the upper left corner, Box 1. You can find it in Box B like this:
After applying on the IRS website, you will receive your very own number just like the one above. In the case that you were paying employees, this would be the number you place on their returns in Box B.
An EIN is optional for most sole proprietors (unless they have employees) because your social security number can be used instead. However, if you don't want your social security number to be used on business documents, opt for getting a free EIN. An EIN is required if your business operates as an LLC, Corporation or Partnership. The main benefits of a EIN are:
- for identifying the business to the IRS and other entities
- to file taxes on behalf of the business
- to open a business bank account
- to apply for business loans
- to keep your social security number separate from your business
Overall, an EIN is easy to get (and most importantly, FREE). It's better to have it and not need it, than need it and don't have it. It is going to eventually come up as you try to grow your business, so you may as well get it as soon as you can.
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