What are the Benefits of an EIN?
1. Dealing with business taxes and tax penalties
When it comes to tax day, you will want to make sure you have applied for an EIN. This is the number you will use to file your taxes for the business. Non-compliance with IRS requirements related to having an EIN could result in penalties.
The IRS may not accept your tax filing which could lead to paying a penalty fee for a late submission. Per the IRS, “the ‘Failure to file Penalty’ is 5% of the unpaid taxes for each month or part of the month that a tax return is late. The penalty will not exceed 25% of your unpaid taxes.”
2. Identity Protection
Identity protection is a hot topic in today's world with bad actors trying to capture people's personal information. Having an EIN for your business is an effective way to help lower the risk of identity theft as it keeps your social security number private. When dealing with vendors or clients, you will provide your EIN when doing business, adding an extra layer of protection to your personal information.
3. Qualify for more business loans and build business credit
Although it is not required, having an EIN when applying for a business loan can add credibility to your application. It may help speed up the process, lead to better interest rates, or lead to a higher loan amount being offered to you.
4. Provide structure for financial record-keeping
A business bank account is another way to keep your business and personal funds separate. Keeping these funds separate will allow you to keep track of your finances easier. This makes tracking, spending, and budgeting more efficient.
Most banks require an EIN to open a business account. With the business account, you can also have a debit or credit card which comes with its own benefits.
5. Hiring Employees
You may start a business on your own but find yourself needing to hire employees to keep up with the demand. You will need to have an EIN to hire those employees. It may be beneficial to obtain an EIN from the beginning even if employees are not being considered at that moment. By having an EIN upfront you will be able to set up a payroll system with no delays when it comes time to hire.