What is EIN and Why Do You Need One

What is EIN

An employer identification number (EIN) or tax ID is essential for every business since it affects all its facets. The IRS provides this nine-digit ID that is used for various purposes in the day-to-day operations of your business. EIN helps in business registration, filing taxes, opening a business account, applying for a business loan, and other factors. No matter what type or size your business is, an EIN is a critical tool that you must have. Read on to learn some of the reasons why you need one. 

Business Identity 

Your EIN or tax ID number is a basic requirement for operating various business enterprises like limited liability companies, corporations, and partnerships. The IRS provides EINs to different businesses for identification purposes. If you do not have this vital number, your business is just as good as non-existent. It is impossible to operate a business without an EIN since this will mean that it is not registered or licensed. Additionally, an EIN offers identity protection against theft, and it also enhances your privacy in the dynamic environments in which businesses operate.

Risk of Losing Your EIN

Losing your EIN can be problematic since it exposes your critical business information, like bank details, to unauthorized people. For instance, fraudsters can use your EIN to access your financial information that can lead to losses. In the blog post What To Do If You Lost Or Misplaced Your EIN, expert tax attorneys urge readers to how to safeguard their business’s confidential information as this can have serious legal consequences. You can take the following measures if you lose your EIN.

  • Contact the financial institutions to secure your EIN and accounts so that they are not accessed by unauthorized people
  • Utilize the computer-generated message that you got upon approval of your EIN to retrieve the details
  • Get help from the Internal Revenue Service (IRS)
  • Use the Edgar System to retrieve your EIN

You must contact the professionals immediately once you lose your EIM so that they can secure your private information. 

Tax Filing

Another reason why you need an EIN is that it is used for filing tax returns. Every licensed business is supposed to pay tax to the IRS and this where your identity number becomes critical. No matter how big or small your business may be, an EIN is a critical tool that you must have since it helps to separate your business and personal finances. It also provides legitimacy to your business. 

Protection of Assets

An EIN separates business from personal assets as well as expenses. If your business hits hard times and you decide to file for bankruptcy, this vital identification number will help protect your assets against business losses. 

An employer identification number is an integral part of every business since it is used for crucial purposes like tax filing. An EIN also helps to identify your business, and it protects its interests against the invasion of privacy. More importantly, you should know that no business in the US can exist without an EIN. When you don’t have this important tool, you may not open a business account or apply for a business loan. Very few businesses can survive without funding.