1. Demonstrates separation between the individual and the business.
Using a business EIN rather than a personal SSN on business documents and filings helps to demonstrate that you are making efforts to keep personal and business dealings independent of each other.
2. Helps maintain personal identity privacy.
With an EIN, sole proprietors can better protect their personal identity when working with clients and vendors. Rather than use your SSN on business paperwork—e.g., W-9 and 1099 forms, sales tax invoices, business credit applications, and other documents—you can use your EIN. Doing so can lessen the risks of identity theft, a problem that has been on the rise.
3. Allows you to open a business bank account.
Many banks will require an EIN to open a bank account for a business. Some banks may let sole proprietors open an account using their SSN, but majority ask for an EIN for all types of business entities.
4. Helps establish business credit.
With an EIN, you can begin establishing a credit history through the business and independent of your personal credit history. This can help sole proprietors when applying for business credit or loans.
5. Enhances credibility.
Sometimes, sole proprietors and/or independent professionals struggle to be viewed as serious business owners. Potential clients may perceive them as more credible if those use an EIN.
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