Starting a business comes with many decisions. One being, “does my business need an EIN?” Let’s backtrack to what an EIN is. So what exactly is an EIN? They are employer identification numbers or tax Id. numbers. Simply put, an EIN is equivalent to a social security number for your business.
The name can be misleading
I’m sure you’re with me that when you hear “employer identification number” you may think, “this is only needed if I have employees.” I mean it is kinda true. Though there’s some instances you may still need an EIN even if you don’t have employees.
If you’re operating your business as a sole proprietorship, whether under your name or a DBA, and you don’t have employees? You don’t need an EIN and can use your personal social security number in that instance. This also applies if you have multiple businesses under multiple DBAs and trade names. Technically you can get an EIN as a sole proprietor but you don’t necessarily need one. For the most part, you only need an EIN as a sole proprietor if you have employees.
Now stick with me here because this is where things change. If you’re operating as a single-member LLC and you’re taxed as a sole proprietor (meaning you haven’t elected to be taxed as a C or S-corp) then you don’t need an EIN. The same goes for if you convert your sole proprietorship or DBA into a single-member LLC.
“Okay, so fit into these. I don’t need one.”
Not so fast I say you don’t need one because legally you don’t.
Tune in to this week’s episode of All Up In Yo’ Business to learn why it may be best for your business to have an EIN. And be sure to subscribe to our YouTube channel for more All Up In Yo’ Business!
Want more information to help with your business? Check out: How To Save Thousands on Business Taxes in 2021.