If you’re starting a business, you need to consider getting an Employer Identification Number or EIN.
First, a disclaimer: I’m not a tax lawyer or accountant. Make sure to consult a tax professional. I’m just a business owner trying to help you start your business. Ok, let’s move on.
In the US, a Tax Identification Number (TIN), Employer Identification Number (EIN), Social Security Number (SSN) are all essentially the same thing. They identify for the government each entity for tax purposes. SSNs and EINs are both TINs. But, SSNs are for people, EINs for businesses.
What you need to remember is this: an EIN is a social security number for your business.
Also, you don’t need to have employees to get an EIN, just a business; and it can even be one you just started.
With an EIN and other documents, you can open a bank account, get a credit card, and conduct your financial business for your business.
An EIN is also crucial because there are all kinds of documents that you need to fill out when you get your first client or customer: a W9, contracts, invoices, etc. that all need a TIN.
And you can put your SSN on it. But why?
Nobody wants their social security number floating all over the place. There are all kinds of identity theft going on out there. Better to be safe than sorry, I say.
Instead, get an EIN. It’s simple, really. It takes five minutes, simple.
Go to this IRS website page and follow the steps. And, in a few minutes, you will have a TIN for your business.
Even if you don’t have an LLC or a corporation and are just a sole proprietor, meaning that you are the only owner of a business and don’t have a legal entity, you can still get an EIN.
Clients and other businesses who pay you will ask you for your TIN (thus a W9) so they can properly show to Uncle Sam that they paid you, thereby making sure that whatever they pay you isn’t still considered taxable income for them. I mean, nobody likes paying taxes on money they paid someone else.
But there’s good news. If someone is asking you to fill out a W9, that most likely means you’re getting paid. Woohoo!
But you do need to deal with taxes. Meh. But that’s just a part of doing business.
This is how you start a business.