Recently I heard this question from our blog reader that can I Open a Business Bank Account Without an EIN? It may be possible but, having an EIN has some additional benefits.

Opening a separate bank account for your business is the best and smartest way to protect your personal assets from business debts and liabilities.

But Most of United States banks require an employer identification number, or EIN, to open a business bank account. There are some cases where it can be avoided, but having an EIN has many advantages that could help your business. 

What is an Employer Identification Number EIN?

An EIN stands for an Employer Identification Number, a 9-digit number issued by the IRS to persons or entities doing business in the United States for purposes of identification. The EIN is also known as Federal Employer Identification Number or Federal Tax Identification Number.

What is an Employer Identification Number

Why do you need an EIN?

There are plenty of reasons for having an EIN:

  • If your business has or is going to have employees, you’ll need an EIN.
  • Any business that is either a partnership or a multi-member LLC, must have an EIN.
  • Most United States banks require an employer identification number, or EIN, to open a business bank account.
  • If you want to hire employers in the future, you will need an EIN. Getting an EIN early on lets you be prepared for the future.
  • Having an EIN helps maintain separation between what is yours personally and what belongs to the business.
  • An EIN can make your business appear more credible. Business owners usually prefer to work with other businesses as compared to just a person doing something on their own.

Related: How to Apply for an EIN

Can I Open a Business Bank Account Without an EIN?

Yes, you can open a business bank account without an EIN, but it may be more difficult. The IRS issues EINs to businesses to track and identify their taxes. However, if you’re a sole proprietor or another type of business owner with no employees, you probably won’t need one.  

Even if you don’t need an EIN to open a business account at a particular bank, it’s still a good idea to have one. Without an EIN, your business will be categorized as a sole proprietorship for tax purposes. Having your own EIN allows you to classify yourself as any type of business entity, including an LLC or corporation. Plus, taxpayers are allowed to deduct up to $5,000 in start-up costs from taxable income per year. That means that the first $5,000 you spend on your new business becomes tax-deductible.

If possible, apply for your EIN before you open a bank account for your business. It will take about two weeks for the IRS to issue your EIN. Once you have it in hand, contact the bank where you want to open an account and let them know that you’ve received an EIN and why it’s important (see above).

Open a Business Bank Account Without an EIN

Benefits of opening an account with an EIN

One of the benefits of opening an account with an EIN is to maintain separation between what is yours personally and what belongs to the business and helps you to protect your personal assets from business debts and liabilities.

Conclusion

In this in-depth guide, I told you Can you Open a Business Bank Account Without an EIN, the Benefits of opening an account with an EIN, and the Importance of having an EIN. Hope this guide will find helpful for you.