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Why Your Company Needs a Business Tax Identification Number

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Why Your Company Needs a Business Tax Identification Number

By Marco Carbajo, Guest Blogger
Published: February 21, 2012 Updated: July 19, 2012

Once you have established a corporation or limited liability company you will need to obtain a Federal Tax Identification Number also known as an Employer Identification Number (EIN).

An EIN number is mandatory, because without one, your corporation will be ineffective for building business credit. A Federal Tax ID or EIN is the corporate equivalent to a social security number. It’s a nine-digit number assigned by the IRS to business entities operating in the U.S. in order to identify each company.

This number is what identifies your business and is used to create your company’s credit file with the various business credit agencies. You will use this number when applying for credit for your company with suppliers, lenders, banks and leasing companies.

Creditors use this EIN number to pull your company’s credit file in order to determine whether or not to extend credit to your business.

When applying for personal credit; creditors use your social security number to pull your personal credit file.

The major difference here is even though you are issued only one social security number as an individual as a business owner you can obtain multiple Federal Tax ID numbers if you own multiple companies.

As a result you have the opportunity to establish multiple company credit files with the business credit agencies.

With a company credit file you truly get to leverage the power of your business.  A business credit file will include your company’s payment history and may include revenues, assets and company financials depending on how much information you furnish to the business credit bureaus.

In addition your files will not show your personal debts or personal financial obligations. When it comes to personal credit you have a limit to the amount of credit you can obtain especially if your business debts are reporting on your personal credit reports. However, the amount of credit capacity a business owner can obtain if he owns a business or even multiple businesses is unlimited.

If you have an existing corporation or shelf corporation but failed to obtain an EIN number no need to worry. Tax ID numbers are not generated in a numerical fashion and there is no way for a lender to determine when your EIN was obtained and then compare it to the start of your business.

You have several choices for applying for your number and if you decide to utilize an incorporation service many times obtaining an EIN is included or offered as an option.

You can also apply for an EIN for your corporation or LLC by either completing a SS-4 hard copy application or apply online.

Once you obtain your EIN it will be your company’s permanent number and can be used immediately for things such as opening a bank account, registering with Dun and Bradstreet, applying for credit, applying for business licenses, and filing a tax return by mail. However, no matter how you apply (phone, fax, mail, or online), it will take up to two weeks before your EIN becomes part of the IRS' permanent records.

Marco Carbajo is CEO of the Business Credit Insiders Circle (http://www.businesscreditblogger.com), a step-by-step business credit building system providing credit recovery, lines of credit, business credit cards, trade credit, and funding sources for businesses.

About the Author:

Marco Carbajo

Guest Blogger

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, About.com and All Business.com. His articles and blog; Business Credit Blogger.com, have been featured in 'Fox Small Business','American Express Small Business', 'Business Week', 'The Washington Post', 'The New York Times', 'The San Francisco Tribune',‘Alltop’, and ‘Entrepreneur Connect’.

Comments:

This is great, I love that this is still relevant information 2 years later!
It is necessary to have as it is used to identify a business entity.
I found the tax identification number to be critical to my business since so many agencies require it
Clear instructions like these that are described in this article about Federal Tax Identification Number or an Employer Identification Number (EIN) should be more widely disseminated, including bodies linked to the IRS. Without a doubt, this information would definitively to the decrease of informal businesses, generating more taxes to be collected. We need to take into account that many small business owners do not know the importance of having their EIN.
Usually i will start boring when i have to read something. But here in your awesome site I do not have boring at all. I really enjoy reading your post, really informative and light writing style. Great job pal!! Keep it up pal... ^_^ Home Ideas Cool Hairstyles Pictures Hairstyles with bangs Perfect Design Car Pictures Awesome article, thanks for sharing..... Fashion, Great Home, Home and Garden Home Design, Updated Fashion Update
Very well said Melda, I think where ever a business is located it is a must to have a business tax identification number. ____________ Small Business Loans
As being said, In business having your Tax Identification number is important factor to consider as it serve as business building credit. This also shows that your business is liable and responsible of paying tax being mandated by law. Thanks for sharing this post. House in the Philippines

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