What is a Disbursement?
A disbursement is the act of paying out money, typically in relation to business or financial transactions. It involves the distribution of …
An employer identification number (EIN) is given to business entities that file with the Internal Revenue Service. These numbers, which are used as unique identifiers for the business, are important for tax purposes. EINs will always be nine digits, with a format of XX-XXXXXXX.
EINs are used by the IRS to track businesses that need to file tax returns. Although they are mandated by the IRS, EINs can also be beneficial to business owners. Businesses are not allowed to operate without EINs, so if an entrepreneur wants to run a business, they’ll need to secure one.
In addition to filing taxes, EINs are also needed for business owners to hire and pay employees, open bank accounts or credit cards, file for business licenses, and separate business finances from personal finances.
According to the IRS, if your business fits one or more of the following criteria, you’ll need an EIN:
In some cases, an EIN isn’t required, but it’s almost always a good idea. You DON’T need an EIN if:
It is up to the business owner to apply for an EIN, but luckily, doing so is completely free. You can apply online, over the phone, by mail, or even by fax. Prior to filing, fill out Form SS-4: Application for Employer Identification Number. It can be found here, on the IRS website.
The form will ask for detailed information about your organization, include the legal name of the entity, the mailing address, the type of entity, the operating industry, the start date of your business, and the reason for the application. Be sure to fill out this form carefully and thoroughly.
Once the form is filled out and submitted, the IRS has a fairly quick turnaround. For online applications, EINs are often granted almost immediately after submission.
An Employer Identification Number sounds very similar to a Tax Identification Number, but in actuality, EINs fall under the umbrella of TINs. EINs are a type of TIN that businesses use. Other Tax Identification Numbers are:
Summary:
A disbursement is the act of paying out money, typically in relation to business or financial transactions. It involves the distribution of …
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