If you run a business, trust or administer an estate, It is legally required for you to have a Federal tax identification number which is commonly known as Employer Identification Number or EIN for short.
Why you need an EIN?
You will be required to have an EIN for various purposes, running a business, hiring employees, filing tax returns, here are few following reasons why you need an EIN
- Banking: Most of the time, you would require to have an EIN to open a bank account for a business, estate or trust. Having an EIN makes it easier to obtain a financial or working capital.
- Business: If you run a business, you are legally required to have an EIN. Employer Identification Number, or EIN for short.
- Hiring employees: If you hire employees for your business, one or many, you will need an EIN. This is the number the IRS will use to track your payroll tax remittances.
- Self-employed retirement plans: A self-employed individual who has decided to establish a Keogh are required to obtain an EIN to process those types of plans’ federal tax treatment.
- Situations where sole proprietors may need an EIN: When Sole proprietors have to declare bankruptcy for their business will need an EIN, as well as those who inherit or buy an existing business.
Where is EIN not required?
EIN is strictly necessary for corporations and partnerships but most sole proprietorships do not. Also, single-member LLCs do not require one, unless the LLC is required to excise tax returns or employment tax returns. The situation where LLC is not required to have EIN is when the LLC is said to be a disregarded entity and business income and expenses are filed on the owner’s tax returns.
Note:
- It is a better practice to have an EIN for sole proprietors as they can protect their identities without having to share their SSN (Social Security Number).
- Having an EIN makes your business appear more professional, which will help to land clients.
Trusts are required to have an EIN, but you won’t need an EIN if you have created a revocable living trust. As it typically uses the grantor’s EIN.
We can help you too!
ITINCAA (AKA TAXANDACCOUNTING HUB) aims to provide expert solutions to you ITIN, EIN, or US Personal tax-related matters considering the appropriate double taxation treaty rules and correct supporting documentation. We have provided EIN registration services for over 18 years, and we are a registered EIN service provider recognized by the IRS.
Get in touch with us at
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