I just started my own business and am being told I need to get an EIN number. Why?

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Answered by: Zac, An Expert in the How to Run a Business Category
This is a common question, as many folks don't even know what it is, much less how to get an EIN number!

It is very important to get an EIN number when you start your business, because it essentially acts as your company's social security number, and serves as a passport to doing all the things a business needs to be successful. In fact, If you don't get an EIN number, it will likely diminish your ability to establish and grow your business.

For instance, any business that you sell more than $600 worth of services and/or products to in a year will have to issue you a 1099 form per IRS regulations, which requires this critical piece of information. Another reason to get an EIN number is that your company's credit will be tied to that number rather than your own personal social security number, allowing you to start fresh and build a clean record that can attract funding and opportunities that might not be possible using your personal information.

Another key privilege gained when you get an EIN number is that your business is now able to open it's own bank account separate from your personal one. This is a critical feature of just about any business-- the divorcing of business assets from the owner's personal assets-- as one of the biggest hurdles many companies face when they try to start growing is that they simply have not managed their monies well enough to be in a favorable enough financial position to take advantage of an opportunity when it presents itself. If you don't get an EIN number for any other reason, do it for this one and make sure you truly do treat the company's money like it is not yours, but a tool to be used to grow your company.

In addition to giving you the financial tools your business needs to be successful, you will also find new potential sources of revenue when you get an EIN number, as this is a required piece of information to become a government contractor. This may or may not be something that applies to you, but if it does, then you might be missing a tremendous opportunity simply because you didn't fill out a simple form.

The form to get an EIN number can be found at https://sa2.www4.irs.gov/modiein/individual/index.jsp, can be submitted online, and immediately returns your freshly-issued number.

There are many reasons why a business can fail-- a declining economy, a mis-judging of the demand for your product or service, or marketplace disruption. While all of those are painful reasons for your business to tank, none is worse than having to look in the mirror and know that it was from simple mismanagement-- whether it be from poor customer service, inadequate financial controls, or something embarrassingly amateur like failing to get an EIN number; you don't want something so simple and easy to avoid becoming your downfall. So, take a few moments and go through the process, and good luck on your new endeavor!

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