The benefits of an EIN
If you're a sole trader or a new business owner, you may not have applied for an EIN, or Employer Identification Number. However, applying for an EIN can help simplify myriad things for your business, including taxation reporting and more general business reporting to the IRS.
One of the benefits of setting up an EIN for your business is that it can help simplify things for you when it comes to reporting on your assets, liabilities, and your bank accounts. Many sole traders will prefer to use their Social Security Number (SSN) rather than an EIN when they first set up their business, but this can be fraught. Using an EIN to open a business account for your company means that you don't need to provide your SSN when setting up a bank account, and also means that your clients or customers don't have access to your personal SSN—which would otherwise be posted at the top of all of your invoices and professional documentation.
Other benefits of setting up an EIN for your sole trader or Limited Liability Company (LLC) include the ability to set up a business credit history. EIN holders are typically required to set up a separate business account for their EIN-holding company. You'll also be able to use business credit cards that aren't directly linked to your personal credit history. Having an EIN can also be beneficial if you wish to wind down or sell off your business in the future, and can offer extra protection to you as owner of the company.
If, down the track, you wish to obtain a DUNS (Data Universal Numbering System) from Dun and Bradstreet, you'll need an EIN. A DUNS number is typically used to verify your business's credit history, monitor its assets and liabilities, and track a business's trading partners and activity. A DUNS number is often essential for “big business”, and having an EIN in the first place makes it much easier for your business to be competitive down the track.
Even if you're not a company, you can still benefit from obtaining an EIN. In fact non-business groups such as churches, scholarship funds, not-for-profit organizations, volunteer groups, and even community sports teams can obtain an EIN. Obtaining an EIN makes your tax reporting and claiming processes far simpler, and can be helpful if you accept or make donations, or employ any type of staff, such as coaches or babysitters.
If you're not sure whether you already have an EIN, you can perform an EIN lookup, or you can check your files for evidence of an EIN. Your EIN can be obtained from the IRS, or you can simply check documents such as payment forms and other tax forms for evidence of an EIN. You can also perform an EIN lookup online, over the phone, or even by checking with your bank. A single company should only ever have one EIN, so if you suspect that you may already have an EIN, it's essential to check before applying for a new EIN for your company.