You may have heard of an EIN, or Employer Identification Number, if you own a business. But what precisely is it, and is purchasing one expensive? These and other inquiries are addressed in this article.
To start, a business’s EIN is a special nine-digit number that the IRS issues for tax purposes. It is not the same as a Social Security number, despite the fact that it is also known as a Tax ID number. An EIN is specific to businesses, whereas a Social Security number is unique to people.
Let’s get to the key question: Does getting an EIN cost money? No, is the response. An EIN can be obtained for free. You can apply for an EIN by phone, mail, fax, online on the IRS website, or even in person. However, if you decide to use a third-party service to apply for an EIN, they can charge you a fee. The fact that you can simply get an EIN for free and do not need to pay for one should not be overlooked.
The following query is: Should an LLC or lone proprietor obtain an EIN? Yes, it is the answer. It is advised that you obtain an EIN if you operate as a sole owner or an LLC. Although having an EIN is not required for sole proprietors, it can be helpful if you intend to hire staff or create a business bank account. An EIN is a requirement for LLCs as the IRS requires one for tax-related reasons.
The question now is: Which is preferable, an LLC or a sole proprietorship? Your company’s needs will determine the solution. The simplest and least expensive option to start a business is as a sole proprietorship, but this does not come with any liability protection. An LLC, on the other hand, protects its owners from responsibility, but it is more difficult and expensive to establish formed. To identify which business structure is ideal for your requirements, it is essential to seek advice from a business attorney or accountant.
And finally, is your SSN and EIN connected? No, is the response. Your SSN is not connected to your EIN, which is a different number. You will nevertheless be required to supply your SSN for tax purposes as a business owner.
Finally, obtaining an EIN is free, encouraged for sole owners, and required for LLCs. Your company’s demands and objectives should be taken into consideration while choosing between an LLC and a sole proprietorship. Additionally, your SSN is not connected to your EIN, which is a different number.