Instead, you can provide your EIN. Providing your EIN means you can keep your Social Security number more private, lowering the chances of a thief stealing it and getting access to your hard-earned profits.
For freelancers and independent contractors, losing even one client can make a big financial difference. You want to do everything you can to cement your status as a legitimate business owner.
That they can quit at any time, no big deal. Companies conserve money and minimize legal responsibilities by hiring independent contractors, so any evidence in support of your status as an independent contractor can help you attract clients. You can speed up the process of applying for a business loan if you have an EIN. As long you have any necessary business permits or licenses and are legally qualified to do business, you can apply for the loan. The catch is that many lenders require applicants to have a business bank account with a certain number of deposits.
This is to ensure that you have a place to receive the loan funds and make periodic loan payments. To get a business bank account, you often need an EIN. In addition, some lenders, including SBA lenders, check business credit when evaluating your loan application.
Having an EIN helps you build business credit, without which you might not be eligible for the loan more on this later. Some banks allow sole proprietors to open a business bank account without an EIN, but others have stricter policies.
Bank of America checking and savings accounts, for instance, require proof of EIN from sole proprietors and all other types of businesses. And once you open a business bank account, make sure the only money going into or out of the account is for business purposes.
You often have to rely on vendors, suppliers and partnerships with other businesses to achieve your goals. Having an EIN makes such third parties more likely to work with you. These parties might want to check your business credit before signing up to work with you. Having an EIN shows that you have a credible business and are a responsible person who will pay the vendor on time. An EIN is key to establishing a business credit history. Business credit history is similar to your personal credit history.
Your business has a commercial credit report. Loans, business credit card activity and payments to vendors and suppliers show up on your business credit report. Anytime you apply for credit by providing your EIN, that account will show up on your business credit report.
If you have employees or are on the verge of hiring employees, then you need an EIN. But even if you have no immediate plans to hire employees, getting one is a good idea if you think you might at some point in the future.
An EIN lets you set up a payroll system as soon as you hire your first employee, without any delays in the hiring process. With an EIN in hand, you might be able to apply for a business credit card or open a business bank account before you get a Social Security number.
This gives you some headway in launching your business and might even give you a competitive advantage if you need to move quickly. You can apply online or by mail, fax or, for foreign applicants, phone. Meet the Editors. When EIN Is Required for Sole Proprietors If you're a sole proprietor, you must have an EIN to: hire employees have a Keogh or Solo k retirement plan, buy or inherit an existing business that you operate as a sole proprietorship incorporate or form a partnership or limited liability company , or file for bankruptcy.
There are two good reasons to use an EIN instead of your Social Security number: Avoid identity theft Theft of taxpayer's identities has become a rampant problem--identity thieves steal taxpayer's Social Security numbers and use them to file fraudulent tax returns and obtain tax refunds.
Help Establish Independent Contractor Status Using an EIN on your tax returns and payments also helps to show that you're an independent businessperson—in other words, an independent contractor and not an employee. Talk to a Tax Attorney Need a lawyer? Start here. Practice Area Please select Zip Code. How it Works Briefly tell us about your case Provide your contact information Choose attorneys to contact you.
Taxes and Tax Law. Personal Income Taxes. Business Taxes. Belle Wong, J. Connect … Read more. Starting a Business. As a business owner, you have many options for paying yourself, but each comes with tax implications. Each business structure has its advantages and disadvantages. Find out what they are. If you need to have an Employer Identification Number EIN for your business, the application process is fairly simple. Knowing what information is required can make filling out the application easier.
LLCs and S corporations are different aspects of business operations, but are not mutually exclusive. Use this guide to learn more about the difference between an LLC vs. Setting up an LLC is a great way for business owners to limit their liability for company debts.
Find out your options for completing the simple form that's required. An operating agreement may not be required by your state when forming your company, but there are many reasons it is important to have one.
An Employer Identification Number EIN is relatively easy to obtain and a useful—sometimes mandatory—tool when starting a new business or considering a side business. Starting Your LLC. The process for trademarking a business name is relatively simple and inexpensive, and well worth its weight in gold in terms of warding off unlawful use by competitors.
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