Starting and operating a business involves numerous administrative tasks, and obtaining an Employer Identification Number (EIN) is a pivotal step in the process. An EIN, also known as a Federal Tax ID, serves as a unique identifier for your business with various applications beyond tax-related matters.
In this comprehensive guide, we will delve into what you can do with an EIN, including the multitude of tasks and activities you can accomplish, providing detailed insights and guidance for each.
1. Start a Company
When you start a business, having an EIN will allow you to open up an officially registered business. When you have a registered company, there are several benefits you can look forward to including tax breaks and more options when it comes to business loans and credit schemes. An EIN will also allow you to keep your personal and business expenses separate and add an extra level of security when it comes to protecting your identity.
2. Onboard Employees
Before you start expanding your team, you need to have an EIN to ensure you keep on top of all your employees’ taxes, pensions, and administrative processes such as payroll. It is a legal requirement for you to have an EIN before you’re allowed to employ anyone in your company.
3. Open a US Business Bank Account
When it comes to banking for your business in the USA, having an EIN is a prerequisite. Most banks require businesses to present an EIN when opening a business bank account. This number is essential for the bank to verify the legitimacy of your business with the tax authority. Without an EIN, you may be turned away when attempting to open an account.
Before you approach a bank to open a business bank account, you need to make sure you have a few things together. Gather necessary documents: formation documents, the information that verifies your EIN for the company, a certificate of incorporation, and two pieces of photo identification. You can then visit a U.S. bank of your choice to open up your business bank account.
4. Apply for Business Permits and Licenses
Before you start operating your business, it’s crucial to obtain the necessary licenses and permits. An EIN is often an essential component for these applications, serving as a unique identifier for your business. An EIN also provides insights to permit granters about the nature of your business. When you need to apply for licenses and permits, it’s important to determine the specific permits needed. Research the licenses and permits required for your type of business and state location.
When you start the application process, provide your EIN along with other required documentation for business permits. Doing your research is essential as even home-based businesses may require a basic operating license or permit, making an EIN essential for legal compliance.
5. Apply for Business Loans and Credit Schemes
When you have an EIN, you get to apply for business loans and credit cards that specifically pertain to your business. These often offer better interest rates and lower fees than those tailored for individuals. They therefore offer more benefits for businesses which include loyalty benefits and discounts with their individual business partners.
Business loans differ from personal loans in terms of borrower identity, loan purpose, risk assessment, loan terms, interest rates, loan amounts, application process, and legal structure. They can therefore be far more beneficial to you and your business when you apply for one, which is only possible with an EIN.
6. File Your Business Tax Returns
Running a business means you need to submit a different tax return to your tax return. One that is separate from your own filing. Your EIN will allow you to file a tax return on behalf of your business. On the other hand, a Social Security Number is what identifies you when filing a personal tax return. Your EIN also helps the IRS to keep track of your taxation history and ensure that you pay the right amount of tax according to the nature of the business you run.
When a business files its tax returns, the EIN is used to identify the entity, ensuring that the IRS associates the financial data provided with the correct business. The EIN is particularly crucial for businesses that are required to report income, expenses, and other relevant financial details, as it streamlines the tax filing process, contributes to the accuracy of submissions, and facilitates communication between the business and the IRS for tax-related matters.
7. Decrease the Amount of Tax You Have to Pay
Depending on the nature of your business, it may be the case that you can reduce the amount of tax you pay. This is especially true for businesses that operate in the non-profit or charity sector. Employers commonly withhold income taxes from their employee’s paychecks, forwarding the withheld amount to the tax authorities on behalf of the employees.
This mechanism is designed to facilitate regular and consistent tax collection, prevent tax evasion, and distribute the responsibility of meeting tax obligations between the payer and the tax authority.
The withheld amount is then credited against the individual’s or business’s total tax liability when they file their income tax returns. Withholding taxes also extends to other forms of income, such as dividends, interest, and payments made to non-residents, ensuring that taxes are collected efficiently and in accordance with relevant tax regulations. An EIN allows you to withhold taxes and file your annual returns accurately.
8. Increase Your Business Credibility
When you start engaging in commerce and serving customers, it’s important that you establish your business properly in order to build credibility within your industry and also with your clients. Having an EIN shows that what you’re offering isn’t just a hobby or a side hustle – it’s something you take seriously. Displaying an EIN on business documentation establishes a sense of trust, demonstrating that your business is legally registered and operates within the bounds of tax regulations.
Additionally, access to financial services, compliance with international business norms, and commitment to ethical employee management further enhance your business’s credibility.
9. Establish a Non-Profit Organization
An EIN is key when establishing a nonprofit organization, should you wish to do so. It not only satisfies legal and regulatory requirements but also helps to streamline various operational aspects, enabling the nonprofit to pursue its mission effectively and transparently. Serving as a unique identifier, the EIN is a legal requirement for nonprofits, facilitating compliance with federal regulations and aiding in the application for tax-exempt status.
Essential for financial transactions, an EIN enables the organization to open a bank account, apply for federal and state exemptions, and engage in payroll and employment-related activities. Additionally, the EIN is crucial for grant applications, contractual agreements, and public recognition, providing transparency and credibility.
Lookup your EIN with EINsearch
If you need to find your EIN to conduct any one of the above tasks but have misplaced it or need to verify it, get in touch with EINsearch today. Our widespread database and unique search tool is a valuable service for businesses that need to conduct an EIN lookup for their own business or for another entity.
Users can utilize EINsearch by accessing the platform and entering relevant business information, such as the legal name or address associated with the entity. The search results will then provide the corresponding EIN, helping individuals or businesses retrieve this crucial identifier efficiently.
EINsearch’s services go beyond EIN verification. We also offer TIN matching services, which allow you to ensure that all the information you submit to the IRS aligns with the information they have on their systems. This is useful when filing your tax claims, as it ensures there won’t be any delays during the process due to incorrect TINs.