Applying for official government documentation can seem like a lot of admin. However, getting an Employer Identification Number (EIN) is an easy process and has several benefits attached to it. Aside from helping to keep your personal and business finances separate, EIN benefits include personal security and credibility. Keep reading to understand more about the benefits of an EIN.
Avoiding tax penalties
Having an EIN may identify you or your business as being eligible for certain tax rebates. For those who work for themselves and use personal bank accounts, there are often benefits to take advantage of. Having your own EIN makes it far easier to file your taxes and provides the IRS with the information they need when assessing your tax status, and how much tax you owe. Although filing for tax is possible without an EIN, having one makes the process a lot smoother.
Helps you establish a professional business
When you run a business, it’s that your conduct and operations look as professional as possible. When you acquire an EIN for your business, it’s good for dealing with legal matters and investment opportunities which are vital for small businesses and start-ups. One of the EIN benefits is that it gives the impression that you take yourself and your business seriously and that you’re certain about your products or services.
Separation of personal and business finances
Another one of the many EIN benefits is that it helps you keep your personal and business expenses separate. This is particularly useful if you run a company under a sole proprietorship or if you work with clients on a contractual basis.
When you have an EIN, it registers your business in a separate tax identification system from your social security number (SSN), meaning you will be able to claim additional tax benefits on behalf of your company that you can’t as an individual.
An EIN also allows you to scale your business, whereas filing taxes through your SSN prohibits you from taking on employees, owing to the fact that you cannot pay payroll using this. Keeping your business and personal expenses separate is also beneficial to your company’s general financial organization.
Build trust with vendors
Those who want to enter into business with you are able to establish the types of licensing and qualifications you have to be able to complete the tasks they set out for you. Showing that you have an EIN shows vendors and prospective customers that you and your business have undergone some level of assessment with the IRS, which instills trust in them and gives your business credibility. For this reason, trust building is another one of the benefits of an EIN.
Hire employees with less difficulty
When it’s time to start expanding your team, another EIN benefit is that it makes the process of hiring employees much easier. Having an EIN allows you to have a separate bank account out of which you can make payments to those on your company’s payroll. Getting an EIN early can also reduce the amount of legal admin you need to get through when you do decide to take on staff.
When you have an EIN, it also makes your business look more professional, which makes your business more appealing for people to work at. An EIN gives job applicants peace of mind and a sense of security when applying for a job at your company.
Opening business bank accounts
When you obtain an EIN for your business, it makes the process of opening a business bank account a lot smoother. Getting a separate bank account for your business helps greatly with keeping your personal and business finances separate, which is very useful if you are a contractor or sole proprietor. Having a business bank account may also result in additional benefits from your bank, and makes it easier to keep tabs on business taxes and other financial matters such as payroll and income.
Speeds up business loan applications
Getting an EIN shows that you have shown the IRS that you are serious about your business. However, another benefit is that it gives you the credibility you need with your bank when applying for business loans. An EIN will help to speed up the process of applying for a business loan as it gives the bank the information they will need about you and your business for a more likely approval.
Helps with obtaining overseas entrepreneur options
If you’re wanting to start a business in the United States but are not a US citizen or in possession of a Social Security number, an EIN can be highly beneficial. You will still be able to get an EIN without US citizenship which will make it a lot easier to apply for business loans or other financially helpful tools like a business credit card. Having these in place will in turn help you establish business credit, which helps when hiring staff or onboarding investors.
Helps with retirement planning
Getting together a retirement plan when you run your own business is a critical part of it. When it comes to being able to retire comfortably in the future, having a solid retirement plan in place gives you peace of mind and a sense of financial security.
One of the EIN benefits is that it allows you to enter into retirement plans that are better than personal ones. For example, plans such as a Keogh plan or Solo 401(k) are only attainable as a self-employed individual when you can show your EIN.