You’ll have many different decisions to make as you embark on the exciting journey of starting a new business—so much so that it can be difficult to know where to begin. As is the case with any big task or goal, it’s best to split things up into sizable chunks and tackle them individually.
In this article, you’ll learn about one of the most important applications you need to fill out when you create your business: the form for your Federal Employer Identification Number (or FEIN for short). This nine-digit number is a prerequisite for many business opportunities, so here are three ways you’ll come to rely on it.
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Have A Federal Employer Identification Number For Tax Purposes
One of the main uses of a FEIN is to manage your business’s tax obligations. No matter what type of business you’re running, the Internal Revenue Service (IRS) states that you must have a FEIN to be able to file your taxes. If you have employees, you’ll similarly need one to deal with tax as it relates to each of them – such as wage reporting, social security contributions, and withholdings.
Your nine-digit FEIN makes certain that taxes relating to your business are kept distinct from you and are dealt with separately, and it helps to standardize the process of filing payroll and income taxes. It’s one of the key pieces of information that shows you’re compliant with federal regulations and laws.
You Need A Federal Employer Identification Number To Open a Business Bank Account
A business bank account offers many benefits, and opening one should be one of the first things you do in the beginning. Business bank accounts allow you to separate your personal and business finances, benefit from specific tools and support only accessible to businesses, help you when you decide to scale up, and offer certain tax benefits.
You’ll need a FEIN to open one, and you’ll also need to provide one if you’re looking to secure a loan. Most lenders will require your FEIN as part of the application process, as it lets them know that your business is legitimate. It’s often considered the first ‘check box’.
Ultimately, a FEIN is the key to a set of very useful financial tools you’ll come to rely on in the future.
For Building Credibility Over Time
Having a FEIN isn’t just about fulfilling legal requirements – it’s also beneficial for the credibility it gives you and your business. Credibility and first impressions are everything when it comes to running a business, and when partners and vendors can see that you have a FEIN, they trust that you are professionally established.
Vendors often require a FEIN to create an account with you, as it verifies regulatory legitimacy, which is, of course, an essential element when negotiating whether a partnership will be formed. In many cases, a FEIN or lack thereof is the deciding factor between one or more bidders.
Wrapping Up
Sorting yourself out with a FEIN is a fantastic first step to getting your business up and running. It’ll unlock many doors for you, so don’t delay – approach an online filing service for a FEIN today!
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