A tax identification number is a numerical designation assigned to a business entity to identify it for tax purposes. It is required in many countries before a company can operate and can be revoked if the business is not operating within the necessary legal perimeters.
Often referred to as a tax identification number, a tax identification number is a numerical designation assigned to a business entity operating in a given locality. The main purpose of tax identifications is to quickly identify the entity in order to associate tax withholding and payments to the company. In addition, many companies use vendor tax identification numbers as an aspect of their internal accounting procedures.
The tax identification number in many ways serves the same purposes as a Social Security number for an individual. The number makes it possible to associate all relevant tax and revenue data to a specific entity and ensure that from a tax perspective, everything stays in order. In many countries around the world, a tax identification number is required before the company can legitimately operate within the country.
Part of the process of creating a business entity involves applying for and receiving a tax identification number. This is often seen as a step taken just before or just after the company’s official incorporation. Some countries require a company to have a tax identification number before incorporation can take place. Others allow the incorporation to occur, with the understanding that the tax identification number will be requested and added to the incorporation within a specified period of time.
It is not unusual for people who operate a home-based business to request a tax identification number, rather than simply using their personal Social Security number. In a sense, this is a great way to keep personal and professional finances separate. However, self-employed individuals may not wish to be incorporated and therefore do not necessarily need a tax identification number to file or pay taxes.
The issued tax identification number remains the property of the issuing government agency and can be revoked if it is determined that the business is not operating within the terms and conditions that apply to the identification number extension. Many companies will not work with providers who cannot provide a valid tax identification number, as the implication is that the provider may not be operating within the necessary legal perimeters.
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