Congratulations you have decided to open a therapy private practice business! Maybe you just got licensed or are working for a large agency with an even larger workload, or maybe you are just emotionally ready now to tackle this business building stuff and just don’t know where to start to build your private practice. I am here to help walk with you through this path of providing therapy only into a therapy business. Today let’s start off with the basics; the first task you must do in order to start a business is to apply for a tax id number or what is commonly call an EIN.
What is an EIN?
It is the acronym that stands for Employee Identification Number. This 9-digit number is issued by the IRS to businesses in the United States for the purposes of:
- An identifier for your business
- Confirms the structure of the business
- For reporting earnings and taxes for the business.
- Paying employees
The format of an EIN number also differs from a Social Security number. An EIN looks like: 00-0000000. EINs are used by many different types of business structures. These would include sole proprietors, corporations, partnerships, including Limited Lability, Corporations, nonprofits, trusts, estates and government agencies. Basically, think of an EIN number as similar to our personal individual Social Security Number, but it’s for a business entity. You need a Social Security number to apply for an EIN number.
In our personal life we use our Social Security Number which is unique to each of us, this number also has a few purposes it
- Identifies us as being legally able to work in this country
- The number employers use to report our wages to the IRS, State tax boards, and Employment Development Departments.
The wages we earn are reportable to the IRS, linked to the account via our Social Security Number. If you are a contractor, you will receive 1099 that is linked to your social security number.
Having an EIN number is helpful to anyone that owns a business, anytime you are doing business with another company or government agency you will need to provide that number to that organization. If you are a sole proprietor or a partnership you can use your personal social security number. However, if you select to use your social security number instead of an EIN that number it will be required to be given to insurance companies, banks, programs used to file your taxes, and also your clients. The client often will request a superbills for their insurance company or use with Health Savings Account or other medical reimbursement programs. Also, the client will need a record of what they paid you for their medical deduction on their taxes. As you can see using your social security number has many disadvantages.
Applying for an EIN
Is easy, painless, and FREE! to apply go to http://bit.ly/1P1f7jS. With a few short clicks and some business information, you will have an EIN in 30 minutes or less. Once you are done completing the application and the IRS approves your application; an SS-4 form letter is generated. This form letter will provide you with your EIN number, the name and address of the IRS office that is serving your location, your company’s name, and address and what tax forms to use and when you must file. Please remember this SAVE THIS LETTER. You will take this letter to the bank to show proof of your EIN, some insurance companies request a copy, and even my landlord wanted a copy. If you ever ask for a loan or apply for grants often a copy is required. While you can use your social security number, I hope I have persuaded you to obtain your EIN number.
Please remember to SAVE THIS LETTER (SS-4). You will take this letter to the bank to show proof of your business is legitimate by having it’s own EIN, some insurance companies will request a copy, and even my landlord wanted a copy to ensure we were an actual business enity. If you ever ask for a loan or apply for grants often a copy is required. While you can use your social security number, I hope I have persuaded you to obtain your EIN number.