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Employer Identification Number - Do You Need This For Your Online Home Based Business?
Employer Identification Number - Do You Need This For Your Online Home Based Business
?Starting an eBiz does require taking care of some legal matters. One of the first things you may need is an Employer Identification Number (EIN). Some online business owners try to get by just using their social security number. That may work for awhile but it will not be the best way to run your business long-term.
Some people that want to start a home based business are primarily concerned about making money right away. It is very important, however, to have a longer range view and take the necessary steps to start your business the right way. This will save you time and money down the road.
Either your EIN or your social security number can be entered when the IRS requests a Tax Identification Number (TIN). The EIN, however, specifically identifies your business. The Employer Identification Number is assigned to identify businesses operating in the United States. If you are going to file taxes as a sole proprietor it is not mandatory to have this number unless you have employees. It is still a good business practice to have one. This number is another way to show you are a serious and legitimate business. Sometimes other businesses such as affiliates and wholesale distributors will not deal with you until you supply your Employer Identification Number.
You can apply for the Employer Identification Number online through the Internal Revenue Service. This is free of charge and only takes about 10 minutes. Do not use one of the third-party online services to obtain your EIN. They will charge you for something that is free and is very simple to obtain.
It is best to decide what business structure you will have before applying for the Employer Identification Number. Will your business be a sole proprietorship, corporation, partnership, or a limited liability company (LLC)? IRS regulations stipulate that an LLC that is owned by one individual should have two EINs. One EIN would be assigned to the individual (as sole proprietor) and the other is assigned to the LLC. You will benefit from consulting a tax attorney before you set up the structure of your business.
The EIN is a permanent number and is used for most of your eBiz needs. It would be used for business licenses, opening up a bank account, and filing tax returns. Even if you are starting out part-time and as a sole proprietor you will benefit by having an Employer Identification Number. It will be a great foundation for growing your online home based business and will be one more step in a successful future.
If you plan to sell merchandise to customers using credit cards in your home based business, you will want to read our article about starting merchant accounts.
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