An EIN helps keep your personal and business finances separate.But here's a key reason why it's a good idea to use an EIN for business even when it's not required: avoiding identity theft. When the IRS mandates an EIN, you don't have a choice. Why can't I just use my Social Security number? Still, there are plenty of reasons why they should. Independent contractors, freelancers, people running small businesses out of their homes, and people with side jobs who capitalize on the gig economy are generally not required to get an EIN. The IRS also requires EINs for trusts created by estate funds and representatives who oversee an estate that operates a business after the owner's death. You're inheriting or thinking of buying a sole proprietorship.You want to offer a Keogh or solo 401(K) retirement plan.You have employees or plan to hire them.Sole proprietorships, in general, are not required to have an EIN. The following business structures are required to have EINs: Related: How to Close an LLC Who is required to have an EIN? EINs are issued by the state and used on state tax forms. It's necessary for paying employees and managing your business taxes. It's like your Social Security Number, except it's designed for businesses only. Understanding who needs to apply and the benefits that come with having an EIN can give your business a real advantage.Īn EIN is an exclusive nine-digit number assigned to your business by the Internal Revenue Service and identifies your business for tax purposes. But in general, an EIN is necessary for independent contractors and small business owners. An Employer Identification Number (EIN) is mandatory for some businesses and optional for others.
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