An employer identification number (EIN), or business tax ID, is a unique nine-
digit number that you use when filling taxes for your business.
An EIN also helps you register a business entity, obtain a business loan, open a
business bank account, and much more.
For some businesses, an EIN is a tax requirement. You have to get one—there’s
just no way around it.
Getting an EIN is optional for other businesses, but there are good reasons to
get one anyway.
In fact, there are some distinct advantages you stand to gain by applying for an
EIN. And the good news is that applying for an EIN is free and takes just
minutes, so you won’t be wasting precious resources by getting one.
Benefits of having an EIN
- Speed Up Business Loan Applications.
- Open a Business Bank Account.
- Establish Business Credit.
You can speed up the process of applying for a business loan if you have an
EIN. Most lenders don’t explicitly require 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.
Fucked up shit 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.
BUSINESS BANK DROPS
As we just mentioned, having an EIN comes in handy when opening a business
bank account. 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.
Along with your EIN, you’ll need to provide a few other documents to open a
business checking or savings account. These include your business’s formation
date, business location, legal business name, and personal information about the
owner. And once you open a business bank account, make sure the only money
going into or out of the account is for business purposes.
ESTABLISH BUSINESS CREDIT.
An EIN is key to establishing a business credit history.
Business credit history is similar to your personal credit history. But instead of
measuring your personal financial habits, business credit evaluates your
company’s history of bill payment and financial responsibility.
Your business has a commercial credit report. Similar to what’s contained in a
consumer credit report, a commercial or business credit report contains a
summary of your business’s credit accounts and payment history. 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’re on time with that account, your business credit score will see a boost,
which can help you qualify for good rates on business loans.
So if you decide to go on the long run you can make some good bank.
HOW TO APPLY FOR AN EIN.
Now that you know all the benefits of an EIN, you might be wondering what
your next steps are for getting one.
The good news is that it’s absolutely free to get an EIN on the IRS website. You
can apply online or by mail, fax.
Applying online is the easiest method and takes just a few minutes. The person
applying for the EIN must be an owner, principal, or officer of the business.
Before you apply, make sure the applicant has their own personal SSN, the
business’s address, and founding date available. If you apply online, you’ll
receive your EIN instantly.
Be wary of services or websites that charge you for an EIN. This could be a
scam. Getting an EIN through the IRS is free and easy.
Once you obtain your EIN from the IRS, it’s effective immediately. You can
start using it right away to apply for loans, open a bank account, or to provide to
a vendor. In most cases, your EIN will remain with you throughout the course
of your business.
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