As a mental health professional, opening a private practice of your own is an important milestone in your career! Being your own boss comes with a lot of excitement and perks that you wouldn’t have if you were an employee of someone else. However, this new adventure can also mean more responsibility and extra work to be done when it comes to setting up and maintaining your business.
While doing research around establishing your private practice, you’ve probably come across the term “EIN” and wondered whether you needed one for your practice. Here’s everything you need to know about best practices around EINs!
What is an EIN?
EIN stands for Employer Identification Number, also known as a Federal Employer Identification Number or the Federal Tax Identification Number. It is a 9-digit number provided to all business entities throughout the United States by the IRS for identification and tax purposes.
Do you need an EIN for your private practice?
Business entities such as corporations, partnerships, and LLCs are required by law to obtain an EIN. If you are a sole proprietor, you are not required to obtain one and can use your Social Security Number (SSN) instead. However, it can be advantageous to get an EIN. Regardless of whether or not you are a sole proprietor, you must obtain an EIN in order to do the following:
- Hire new employees
- Open a business banking account (most banks require EIN to be able to do this)
- Have a Keogh or Solo 401(k) retirement plan
- Incorporate or form a partnership, corporation or LLC
- File for bankruptcy
Why should you get an EIN?
With so many items on your to-do list waiting to be completed, obtaining an EIN might seem daunting at first, but you’ll be surprised by how simple the process actually is. There are a lot of advantages to having an EIN, not only for your business, but also for your own personal reasons! With an EIN, you can:
- Reduce the risk of identity theft. Using your SSN for your practice could potentially put your identity at risk as you may be required to utilize your SSN on public-facing documents.
- Establish business credit. Just as you establish your personal (or consumer) credit, you can do the same thing for your business. It’s important to establish good credit for your practice should you need to apply for a mortgage or take out a loan under your practice’s name.
- Establish validity of your practice. Opening your own therapy practice with its own identification now sets the boundary between your professional and personal life. While your purpose is to provide your clients with powerful, life-changing help with their mental health, it is also critical that you demonstrate your commitment to your practice – something that you could devote your time and efforts to provide the best experience for your clients.
How do you get an EIN?
It is free and very straightforward to apply for an EIN, and you can do it all by yourself from the comfort of your own home! The fastest and easiest way to obtain an EIN is to apply directly through the IRS Website. The IRS offers further information and assistance here.
Getting an EIN may seem like a tedious task, but it’s actually a very simple process! Heard aims to help therapists feel more prepared to tackle business tasks, and our team is always here to assist you in figuring out whether or not an EIN is something needed for your practice and personal situation. You’re one step closer to running a successful private practice!
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post.