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Reasons Why Your Small Business Needs an Employer Identification Number

Entrepreneurs often shrug off the idea of obtaining an employer identification number, or EIN, believing that their small business really doesn’t need one.


At Curran Wealth Management, we strive to be resources for our clients in every aspect of their life. Many of our clients are entrepreneurs and with the ever changing business landscape, and the seemingly more complex issues to navigate, we stay up to date and educated to lend a helping hand whenever needed. 

Entrepreneurs often shrug off the idea of obtaining an employer identification number (EIN) believing that their small business really doesn’t need one. Though there are some cases where a solo business can get away with merely utilizing the business owner’s Social Security number (SSN), doing so is not necessarily the best idea, even if you don’t have plans to hire employees in the future. In almost all instances, having an EIN is a good idea. It provides many benefits that go beyond facilitating the payment of employees. 

Using an EIN Instead of Your SSN Protects Your Personal Information 

One of the top benefits offered by an EIN is that it can help protect your personal identity. Though you still need to protect your EIN and shouldn’t share it without being certain of how it will be applied, using it for your business means that your personal information will have less exposure. Government forms and documents require an identifier, and the EIN (which is issued by the IRS) can be used on all of these instead of the SSN. Though you can still suffer significant damage if your EIN is stolen, the information that is limited to your business is less sensitive than the information that is connected with your SSN. Both require vigilant protection. 

If You’re Going to Incorporate, You Need an EIN 

Immediately incorporating your business makes it into a separate entity, and as such, it needs its own form of identification, especially if you’re going to have employees. Even if you’re considering yourself an employee, you will need to pay yourself a salary, and that means that you will need to collect payroll tax and take other steps that keep you in compliance with IRS requirements. This is true whether your entity is established as a corporation, an LLC, and especially as a partnership, as you can’t use two SSN’s for filing financial papers. 

The EIN Has Multiple Applications 

Having an EIN has long-term benefits that go far beyond its initial issuance. In addition to facilitating payroll, it can also be used to apply for all types of credit accounts and bank accounts needed by entities including general partnerships, LLCs, S corporations and sole proprietorships. You’ll need to have that number available for filing to change your business’ entity, for filing your tax returns every year, for setting up financial instruments such as profit-sharing plans, pensions, and retirement plans, and more. 

Every business is different, and though we encourage all business owners to give serious consideration to obtaining an EIN, we know that it may not apply to your situation. Please call this office if you have questions related to an EIN and your particular circumstances.

Please check with your tax advisor, your Curran Wealth relationship manager, 
or contact Curran Wealth Management if you have any questions.  
 518.391.4200 •
info@curranllc.com




The material contained in this article is for educational and informational purposes only.  The information herein is considered to be obtained from reference sources deemed reliable, but no representation or warranty is made as to its accuracy or completeness. It is not, and should not be regarded as “investment advice” or construed as a “recommendation” or an offer to buy or sell a security.  CIM, LLC does not provide tax or legal advice.  No one connected with CIM, LLC can ensure tax consequences of any transaction.  The information contained in this article may not apply to your personal circumstances.  Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation.