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If you’re starting a new business—or planning on expanding your current one—it’s important to have all your legal and financial affairs in order. That includes securing your Data Universal Numbering System (DUNS) number and Employer Identification Number (EIN). As these two numbers are critical to conducting business within the United States, understanding their individual purposes can help you remain compliant, leverage credibility, and access key business opportunities to grow your business.
Follow along as we explain the differences between a DUNS and an EIN, as well as the specific purposes of each of these business identification numbers.
EIN vs DUNS Number: What’s the Difference?
An employer identification number (EIN) is a unique nine-digit number assigned by the IRS. The purpose of the number is to serve as a business identification code for every registered business entity for tax and legal purposes.
Meanwhile, a data universal numbering system (DUNS) number is also a unique nine-digit identifier, but with a different purpose. The Dun & Bradstreet (D&B) credit bureau issues this number. The numbering system is standardized across global associations and serves as an identifier to track business credit history and perform background checks.
Although a DUNS and an EIN both identify businesses, it’s important to note that they are issued by different authorities. Additionally, EINs are US-centric, while DUNS numbers are global.
The Purpose of an Employer Identification Number (EIN)
For businesses, an EIN serves as a tax identification number (TIN). As a business operator, you will need an EIN to file federal taxes and hire employees. Most business structures are required to obtain an EIN from the IRS. However, if you are a sole proprietor and do not have any employees, you are not required to get an EIN—you may opt to use your Social Security number (SSN) for tax purposes instead.
Besides using this number for employment, income, and payroll tax, financial institutions generally require your EIN to proceed with loan and merchant account applications. An EIN can also be useful in legal matters, such as filing for bankruptcy or lawsuits.
The number format includes a two-digit prefix (XX-XXXXXXX). These two digits identify which IRS EIN source issued your federal business tax identification. If you registered your EIN before 2001, the first two digits indicate the primary place of your business location.
Instructions for Obtaining an Employer Identification Number (EIN)
Applying for an EIN is a quick and easy process, provided you have the required information at hand. You can complete your application online by visiting the IRS website and selecting the ‘Apply for an Employer ID Number (EIN)’ option.
Complete IRS Form SS-4 and review the information before submission, as missing or incorrect details will lead to application rejection. The IRS verifies your information during your session and assigns you an EIN within a day—often within the hour—via email.
Note: For a more comprehensive breakdown of the process, see our in-depth guide on the EIN process.
Advantages of an EIN
While the primary purpose of an EIN is tax filing, there are numerous other advantages to registering for a number. Your EIN can also help with
- Identity Protection: Using an EIN offers an extra layer of protection by keeping your social security number (SSN) private. When vendors request credit information or customers need details for payment, they use your EIN as an identifier instead of your SSN.
- Tax Benefits: As an employer, you must pay payroll and FICA (Federal Insurance Contributions Act) taxes, even for temporary staff. An EIN facilitates payments to state and federal agencies and allows you to receive credit for these payments. Your tax planner can advise you of benefits according to your unique small business setup.
- Licenses & Applications: Should you need any permits or licenses, your EIN serves as verification to authorities that you have the proper credentials to run your business. You’ll also need an EIN to apply for loans and open a business bank account.
- Payment Processing: To start accepting payments—including credit, debit, online, and other electronic payments—you will need to apply for payment processing. Guess what you need for that application? An EIN!
- Protection From Business Losses: In the unfortunate case of bankruptcy, an EIN can help protect your personal assets from business losses.
Using Your EIN: Best Practices
To get the most out of your EIN registration and regularly maintain tax compliance, implement the following practices:
- Active Record Keeping: To remain compliant with IRS regulations and avoid audits, keep accurate records of all your business transactions, including income, expenses, and taxes paid.
- Timely Reporting: Make sure you understand and adhere to IRS report schedules. This includes submitting annual tax returns and payroll tax returns on time, as well as quarterly estimated tax payments.
- Information Updates: For any changes in your business—such as ownership, structure, or address—a new EIN is necessary.
- Data Protection: Protect your business data and EIN from identity theft by keeping it confidential. Only share the necessary data with trusted parties as required.
The Purpose of a DUNS Number
Your DUNS number, assigned by Dun & Bradstreet (D&B), is a globally recognized business identification number. This number is permanent and doesn’t change even if details like your legal business structure do. By linking your organization to a D&B credit file, potential partners, lenders, and suppliers can verify your business’s creditworthiness.
Since it is not a federally-issued ID, you cannot use your DUNS number to apply for a business credit card. For this, most financial institutions require a government-issued tax ID, such as an EIN or SSN. Despite this, a DUNS number is still key to helping you build your business credit score. Upon obtaining a DUNS number, lenders and vendors that collaborate with D&B will start reporting your payment activity, thus building your credit history. Without a D&B profile, you risk leaving your credit history to chance.
Instructions for Obtaining a DUNS Number
You can apply for and obtain a DUNS number directly through Dun & Bradstreet. D&B uses multiple criteria to validate the existence of your business before issuing a number and may contact your business to verify credit reporting details.
Since the process is somewhat more involved, it can take up to 30 days to receive a DUNS number. There is, however, an option to fast-track the process and receive a number within five business days. This expedited service comes at a fee of $229.
Before starting the application process, be sure to verify that your business has not already been assigned a DUNS number. You can check that you are not already in the Dun & Bradstreet database by using the DUNS Number lookup tool.
Advantages of a DUNS Number
Your DUNS number can play a key role in opening up greater business opportunities. When you develop a solid business credit history, you can have the potential to negotiate more beneficial agreements. You may be able to benefit from lower interest rates, higher limits, and longer repayment periods.
In addition, your DUNS number also serves as a buffer between your business and personal credit. If you don’t have a DUNS number, your personal credit is used to apply for business financing.
Using Your DUNS Number: Best Practices
To maximize the benefits of your DUNS registration, keep the following best practices in mind:
- Regularly Update Business Information: Keep your business information current by updating addresses, phone numbers, and other details as needed.
- Monitor Credit Reports: Monitor your business credit report regularly to identify errors or inaccuracies that could lower your score and hinder opportunities to get financing.
- Stay On Top of Payments: Since a major point of a DUNS number is to build a solid credit rating, make sure to pay all bills on time and in full. You can then leverage your DUNS number to secure loans, business lines of credit, and other financial solutions.
DUNS vs EIN: Both Empower Business Success
While you may be a master of your craft, the legal and financial complexities of running a business can be challenging on the best of days. Thankfully, by registering for a DUNS number and EIN, you can set yourself on the right track from the start. And with your EIN in hand, you can then apply for a merchant account, and start taking your first payments as a business! When you do, make sure you have the right credit card processing options at the ready by reaching out to PaymentCloud today.
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