An Employer Identification Number or EIN is a unique nine-digit tax identification number issued to businesses by the United States Internal Revenue Service (IRS). The EIN is also known as a FEIN or Federal Employer Identification Number. Some people also use terms like Federal Tax ID Number (FTIN) and Federal EIN Number to describe an EIN.
EINs are generally used by businesses that have employees. However, sole proprietors and general partners can apply for an EIN from the IRS even if they do not plan to hire employees. EINs benefit business owners in the US several ways, from reducing the risk of identity theft to making it easier to open a business bank account.
Security Benefits For Self-Employed House Cleaners Using An EIN
Using an EIN can reduce the risk of identity theft for business owners. An EIN can be used instead of a Social Security Number (SSN) on a variety of business, banking and tax forms. Unlike a personal SSN, which is a key to unlocking personal financial information, a business owner’s EIN is not directly linked to personal credit information and finances. It is difficult for someone who only knows a business EIN number to open credit cards and bank accounts in a business owner’s name.
Many business license and tax registration forms used by cities, counties, states and the federal government require an EIN. A lot of those official documents can be viewed by members of the public. That means if your social security number is on a license or tax form, it could become public knowledge at some point. It is safer to use an EIN instead of your social security number on those forms.
If you buy supplies and equipment wholesale to sell to others (for example, you buy microfiber cloths in bulk to sell to your customers), some wholesale companies want your EIN number before they sell to you. This helps you since your social security number is not floating around an office in unsecured paper files or “in the cloud” on the internet where hackers can grab it and open accounts in your name.
EINs can be used on forms given to non-employee workers (such as subcontractors) or suppliers. If you do business with subcontractors during the year and pay those workers more than $600, you have to send them a IRS tax Form 1099-MISC early the next year. On Form 1099-MISC, the business owner must enter a tax identification number, which could be a social security number or an employer identification number (EIN). To guard against possible identity theft, it is better to use an EIN than revealing a social security number.
Other Common Uses For EINs
An EIN can help with opening a business bank account at a commercial bank. Some commercial banks require proof of EINs from sole proprietors and other business owners to open a checking account, apply for a business loan or a business credit card.
With an EIN, a non-US citizen can start a business in the US. An EIN also helps a non-citizen apply for a business credit card or open a business bank account in the US. Non-US citizens can apply for an EIN by contacting the IRS.
An EIN makes it easier to start hiring employees or using subcontractors, if you decide that is the next step in your cleaning business.
EINs are also commonly used by business owners if they buy or inherit a business, set up a retirement plan or file for bankruptcy.
EIN Rules For The Self-Employed
For a sole proprietor, an EIN will remains the same throughout the life of your business unless the legal form or ownership of your business changes. Sole proprietors are required to get a new EIN if they:
• add a partner
• form a LLC or incorporate
• declare bankruptcy
• purchase or inherit an existing business that you operate as sole proprietor
General partners are required to get a new EIN if:
• they form an LLC or incorporate
• the partnership is taken over by one of the partners and operated as a sole proprietorship
• the original partnership ends and a new one is started
How To Get An EIN
EINs are issued by the IRS for free. EIN applications can be done online, by mail, fax or for foreign applicants, by phone. Apply for an EIN online. An EIN can be used right away for many business needs such as:
• Opening a bank account
• Applying for business licenses
• Filing a tax return by mail
An EIN is a handy number for the self-employed. Using an EIN instead of a social security number helps keep sensitive personal information off public forms. EINs are used for banking and credit applications. Some equipment and supply vendors prefer to do business with other businesses that have EINs. Cities, counties, states and the federal government require EINs on a variety of licenses, registrations and tax forms. Securing private information with an EIN provides many benefits for self-employed business owners.
Just Getting Started?
- Apply for a business name
- Get a business license
- Register to pay taxes
Just click on the map to find your state and get started.