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Why You Should Get an Employer Identification Number (EIN)

By November 11, 2019 No Comments

In the freelance world, an Employer Identification Number (EIN) isn’t always a requirement. But you may be selling yourself short and missing out on some opportunities by not having one. You can certainly always file your taxes as a sole proprietor, but there’s more to being in business for yourself than just a designation.

Safety

Who hasn’t cringed when working with a new client who asks for a social security number? And there’s more to worry about than just the client. There is no way to transfer digital data that is 100% secure, so sharing your SSN can lead to terrifying consequences. An EIN keeps your personal information separate from your business information, reducing the risk to your personal safety significantly.

More Opportunities

Best of all, having an EIN can create more opportunities for you and even your loved ones.

  • The biggest benefit is probably the ability to do business with other businesses, regardless of your personal history or standing. Some vendors and retailers offer discounts to businesses, but don’t recognize you as a business if you don’t have an EIN.
  • Potential clients and other business associates tend to take you more seriously if you have an EIN. After all, anyone can throw a name out there and say they have a business, but not everyone is serious enough to take the steps to make it official.
  • Even those who live overseas can obtain an EIN in America and begin building a reputation and credit before they are even on American soil.
  • New laws in California are forcing businesses to do away with the freelance model. When it comes time for a business to choose between hiring an employee when they really need a freelancer, having an EIN may make the difference between whether you get the job or not.
  • You aren’t building a business for the fun of it. What happens when you develop a solid brand and want to sell it or pass it down to someone after you die? To do either one, you have to have an EIN.
  • Planning for retirement? It takes an EIN to have an independent (solo) 401(k) or Keogh plan.

Financial Management

Do you have bad personal credit and find it difficult to get what you need for your business to grow because of it? An EIN can go a long way toward solving those issues. As a business with an EIN, you can apply for credit using your EIN rather than your SSN. This helps prevent you being denied because of personal issues and helps to build your presence as a business, especially if you have established credit as a business.

Unfortunately, having an EIN as a sole proprietor doesn’t necessarily mean your personal finances are protected from your business obligations. Creditors can still come after you personally if you fail to pay your debts. The only way to properly separate your personal and business lives is by filing for an LLC or some other type of corporation. Check with a legal advisor for more specific information on how it works in your state.

Multiple Businesses

Using an EIN for your business also makes it easier to keep all accounts separate when you have more than one business. With an EIN for each business, there is no risk of financial issues bleeding into one business from another, and it makes it much easier to track all your expenditures.

Worried about having to jump through hoops to get an EIN? Relax. You can fill out the online application for an EIN here, and get your number as soon as you’re done.

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