Every U.S. citizen has a Social Security number (SSN) that can be considered, essentially, the key to their identity. We all use these numbers on every tax form we fill out, to open up a bank or creditor account, and more. So, just think what might happen if your SSN is compromised by an identity thief. It could either be used to file taxes and claim your refund, or to take out lines of credit under your name, which could harm your finances, credit score, and your good name.
In much the same way as an SSN is used to help the Internal Revenue Service (IRS) keep track of individual taxpayers, it also keeps tracks of businesses, big and small, with an Employer Identification Number (EIN), also known as a Federal Tax Identification Number. In this way, the agency is able to recognize the enterprise as a legal entity, keep track of their tax activity and make sure that the organizations are following all of the rules.
Losing the EIN could spell trouble for a fledgling company
Businesses use their tax ID numbers to apply for loans and lines of credit in a way not dissimilar to how an individual uses their SSN. Since it represents the entire company, however, the EIN can be attached to a lot more money than an individual's SSN might be, and the stakes are, therefore, much higher if the EIN gets stolen.
Small businesses tend to have the most to lose, as their operations are a lot more fragile than larger companies that have established themselves and their finances. Yet, owners of small enterprises tend not to see the risk in sharing the details of their business dealings with employees, friends or family since it may not seem like a large or important operation. This may not always be a wise move, though; their the EIN has to be guarded with the same amount of diligence that an SSN would be.
Owners should practice discretion when it comes to EINs
Company owners should only share their EIN with others at the company who have an active role in managing the company's finances. This is because the stakes are high for enterprises that are either small or young as the few funds available could make or break the businesses success. If an identity thief uses the company's EIN and ruins that venture's credit score, they may have trouble sustaining their business in the long run.
Here's a tip: If you own a small business, monitor your company's finances closely and be wary about sharing any tax information with others. Enroll yourself in a credit monitoring program as well, since you may have trouble keeping track of your own credit report while managing a business at the same time.