The Importance of a Tax ID Number

New businesses spring up each and everyday, and while the product or service you plan to provide might be revolutionary, there are risks with all business ventures. Generally speaking, it is ideal to separate your personal finances and assets from that of your business in the event that your business fails, or does not become as profitable as you would like. The best way to accomplish this is to establish a tax identification number (TIN), also known as an employer identification number (EIN).

An EIN officially separates your personal identification from that of your business. It also offers a great opportunity to establish strong business credit, even if your personal credit is sub par. In addition to protecting your personal assets, an EIN enables business owners to essentially start with a clean slate. Regardless of your personal credit score, or less than favorable dealings with lenders, an EIN essentially establishes your business as its own person—which allows you to build spot-free business credit.

According to the IRS, you will need to apply for an EIN if you can answer "Yes," to any of the following questions:

• Do you have employees?
• Do you operate your business as a corporation or a partnership?
• Do you file any of the following tax returns?
o Employment
o Excise
o Alcohol
o Tobacco
o Firearms
• Do you withhold taxes on income, other than wages, paid to a non-resident alien?
• Do you have a Keogh plan (a tax-deferred pension plan used by unincorporated businesses and those who are self-employed for retirement purposes)?
• Are you involved with any of the following types of organizations?
o Trusts, except grantor-owned revocable trusts, IRAs, Exempt Organization Business Income Tax Returns
o Estates
o Real estate mortgage investment conduits
o Non-profit organizations
o Farmers' cooperatives
o Plan administrators
Learn how you can quickly establish an EIN and protect your personal assets.


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