Discover why businesses owners decide to use an Employer Indentification Number (EIN) over a Social Security Number (SSN) and how it relates to your taxes.
SSN vs. EIN
Thinking about getting an Employer Identification Number (EIN) instead of using your own social security number for your business? This article will introduce you to the Employer Identification Number, how to obtain it and why and where to use it.
There are many reasons to obtain and use an Employer Identification Number over your own social security number. The most important reason is for safety. Identity theft is a large problem in the United States. A lot of the documents you will sign as the owner or as an executive of the business will require an identification number. Some or most of the documents can be public domain which means your social security number could potentially become public knowledge. In the United States you can obtain an Employer Identification Number instead of using your social security number.
You can use the Employer Identification Number to open a business bank account, file taxes, and buy stuff for wholesale. Some wholesalers will not sell you merchandise unless you have this number. Most business to business transactions will require this as well. If you are incorporated, you need to have an employer identification number in order to maintain a professional image and to act as a separate entity. Some court systems could rule that you are not protected under the rules of incorporation because you did not treat it as an independent entity.
There’s really no downside to having one. The Employer Identification Number is easy to obtain. It only takes a few steps. You can do it online, through the mail or even over the phone. The IRS is the agency responsible for issuing the numbers. If you visit their website and look under the business section you will find it fairly easily. If you apply online for employer identification number, there is no cost at all to you. Once you fill out their easy form online, you will be instantly given your Employer Identification Number. The service is available 24 hours a day. You will receive a PDF letter stating your EIN number and this will become your proof of ownership.