Before you can start a business, you will probably need to apply for an employer identification number (EIN) with the IRS. The EIN filing process is relatively simple and some companies even offer an EIN filing service. Having EIN allows companies and organizations to access a variety of privileges typically reserved for businesses and nonprofits. If you have ever considered starting any type of formal organization, here are five reasons to file for an EIN.
1. Hire Employees
It is necessary to file for an EIN as a sole proprietor, but organizations and businesses who intend to hire employees will certainly need to file for an EIN. The EIN allows employers to withhold revenue and distribute tax forms to their employees. If you are currently operating your business as a sole proprietorship, having an EIN will make it easier in the future if you decide to become a partnership or LLC or hire other individuals to assist you.
2. Open a Business Account
As a business owner, it is necessary to keep your personal funds separate from your business funds. To do this, many organizations utilize business bank accounts, which are offered by most commercial and private banks. Most of these banks will only open a business account for customers with an EIN.
3. File for Bankruptcy
Running a business or nonprofit can be difficult, and sometimes, filing for bankruptcy is necessary. Most people know how to file for personal bankruptcy, but to file on behalf of a business or organization, you will need an EIN.
4. Prevent Fraud and Identity Theft
As its name suggests, an EIN allows the IRS to identify business and organizations. This means that if a person attempts to file fraudulent tax returns or open a business account without permission from the owner of the business, it will be far easier to catch them and keep track their actions.
5. Pay Taxes
Simply put, if you file any type of excise, employment, or alcohol, tobacco, and firearms tax returns, the IRS will require you to have an EIN.
ContactGov Doc Filing today to get help with your LLC forms or to learn more about EINs and their benefits.