When it comes to starting a new enterprise, there are many different things that you have to do to make sure that your company starts off on the right foot. One of the most important items is ensuring that your paperwork is filled out and filed correctly. However, to do that, you’ll need your federal tax ID information. So, with that in mind, let’s go over the different kinds of Tax IDs that you can have and how they work for your business.
What is a Federal Tax ID Number?
Simply put, this is what the IRS uses to identify your company for tax purposes. Depending on the kind of business you start, you can use one of several different numbers for your documents, and they each have a particular purpose.
Social Security Number
As you know, this is the number assigned to you for your personal Tax ID filing. However, if you want to start a sole proprietorship, then all you need is an SSN because the business is tied directly to your own assets. While this can make things a bit simpler in the short term, it also means that business expenses and debts will also be connected to your SSN.
Employer ID Number
For the most part, this is the kind of identification you want to get from the IRS because it provides you with a lot of different options. First of all, you need an EIN if you ever plan on having employees. Secondly, if you want to have a business bank account, then this will be necessary.
Tax ID Number
In some instances, you may want to start a new enterprise without an EIN, but you also want to separate your company from your personal finances. In that case, you can simply apply for a TIN instead which is just a new number issued by the IRS. Technically speaking, each of these numbers qualifies as a TIN, but you can get an ID for your business that is not the same as an SSN or EIN.
In the end, filing for a Tax ID number should be one of the first steps you take when starting your new company to ensure that everything runs smoothly with documentation and licensing.