How to Decide if You Should Apply for an EIN
You may or may not have even heard of an Employer Identification Number, or EIN before. When most people file their taxes, they use their social security number. An EIN is almost like a social security number for a business or organization. Here, we will discuss when you need an EIN and how to apply for one. By the way, it is free to apply for an EIN!
Do I even need an EIN?
If your business is registered as anything except a sole proprietorship, you need an EIN. Feel free to skip ahead to two sections. But what about sole proprietorships. Well, if an EIN is for a business and you are only a one-person startup, it seems simple that you just don’t need one, right? Well, kind of. A sole proprietorship does not technically need an EIN. You are allowed to use your Social Security number, since legally the business and you are one and the same. This is the easiest answer. However, I recommend looking at the advantages of having an EIN anyway.
Benefits of having an EIN
If you choose to not apply for an EIN, anytime you need a tax ID number (which may be often), you will need to use your personal Social Security number. This opens up a lot of opportunities to run into issues such as identity theft. By having an EIN number, you will have a number that is only linked to your business. Your personal Social Security number will not be floating around for anyone to steal. This was the main reason I chose to apply for an EIN.
In some circumstances, you may end up needing an EIN in the future. If you eventually hire employees, an EIN is required. However, many banks even require an EIN to open an account for a business. Since it is a lot easier to have everything be standardized from the start, it may be easier to just apply for an EIN now.
How do I actually apply for an EIN?
It’s really simple, plus it’s free! Go to this page on the IRS’s website and be sure to have your Social Security number on hand. Click on the “Apply Online Now” button and answer the questions. It should only take about 15 minutes. Plus, you will get your EIN relatively quickly (I got mine the next day.) If you have any questions, feel free to ask in the comments.