LEARN ABOUT EIN(EMPLOYER IDENTIFICATION NUMBER) FOR YOUR HAIR BUSINESS

WHAT IS AN EIN?

Just as individual U.S. citizens have unique social security numbers to identify themselves, U.S. businesses are issued employer identification numbers, commonly referred to as EINs. EINs are unique, nine-digit numbers issued by the Internal Revenue Service (IRS) and primarily used to report employment taxes. They may also be called federal tax ID numbers. Like social security numbers, they never expire and are never reissued to another business.

EIN

WHY NEED AN EIN?

#1 Submit tax returns

If your business is a partnership, a multi-member limited liability company, or you have employees, you need an EIN to file tax returns. This is the proof of identity you will use when submitting corporate tax to the IRS at the end of the year. Every financial decision made on behalf of your business will be tied to its EIN. If you apply as soon as possible, you will not have to deal with the risk of missing the tax deadline.

 

#2 Hiring employees

If your business has employees, you will need to obtain an EIN because a multi-member limited liability company does not file or pay taxes as a limited liability company; instead, each employee will file a separate tax return on the LLC’s 1040 form. Employers need EIN to set up payroll, and the US Internal Revenue Service will use corporate EIN to track payroll taxes. EIN is required to register for employer taxes in your state, such as paying workers’ compensation and withholding income tax on behalf of your employees.

 

#3 Keep the company veil

If you are a single member LLC, EIN can help you maintain the corporate veil. The corporate veil protects business owners from personal liability for corporate debts. Separating personal finances from professional finances will help prevent you from lifting the veil of your company. It will also build credibility and professionalism by allowing your business to have an identity separate from the owner.

 

#4 Prevent identity theft

Applying for an EIN instead of using your social security number (SSN) will make your SSN more private, thereby reducing the risk of identity theft; when you separate corporate finances from personal finances, it is unlikely that someone will break into your account. If you are a sole proprietor without EIN and continue to send your SSN to customers or suppliers, then you put yourself at higher risk.

 

#5 Open a commercial bank account

Most banks require EIN to open a commercial bank account. A commercial bank account is another way to make your personal finances and professional finances independent. It will simplify the process of tracking and managing your professional expenses; therefore, you will be able to develop a more effective budget plan for your business. Commercial bank accounts will also provide you with financial professionals and services (such as payroll services, access to small business loans), which will make your business operations easier.

 

#6 Build business credit

Just like a social security number tracks your personal credit, loan and credit agencies use EIN to track your business credit. Establishing strong credit will help maintain the financial stability of your business. Applying for EIN is an essential step. Having good commercial credit can bring better interest rates, more loan qualifications, and higher opportunities for future expansion of the company.

 

#7 Eligible for more business loans

Although EIN is not required to apply for all commercial loans, many lenders prefer companies that establish commercial credit through commercial bank accounts. If you have strong business credit, you will be more likely to qualify for certain loans. To start building this credit, you need to obtain an EIN.

 

EMPLOYER IDENTIFICATION NUMBER

HOW TO APPLY FOR AN EIN?

All EIN applications (mail, fax, electronic) must disclose the name and Taxpayer Identification Number (SSN, ITIN, or EIN) of the true principal officer, general partner, grantor, owner or trustor. This individual or entity, which the IRS will call the “responsible party,” controls, manages, or directs the applicant entity and the disposition of its funds and assets. Unless the applicant is a government entity, the responsible party must be an individual (i.e., a natural person), not an entity.

 

#1 Apply Online

The Internet EIN

 

#2 Apply by Fax

Taxpayers can fax the completed Form SS-4Where to File Your Taxes (for Form SS-4)

 

#3 Apply by Mail

The processing timeframe for an EIN application received by mail is four weeks. Ensure that the Form SS-4Where to File Your Taxes (for Form SS-4)

 

#4 Apply by Telephone – International Applicants

International applicants may call 267-941-1099 Form SS-4

 

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