Does a Sole Proprietorship need a Tax ID (EIN)?

Quite a few sole proprietorships are schedule C proprietorships. They don’t have an EIN. They just pay taxes through their SSN/ITIN. If there are forms that the company needs to fill out, or permits the company needs, they use their SSN. And if the sole proprietorship has to open a business bank account or get a loan, the SSN is also used. This doesn’t create perfect separation between business and individual, but it doesn’t need to. Schedule C businesses are essentially the individual themselves.

However, if a sole proprietorship wants to hire employees, this all changes. A tax ID isn’t just used for taxes. It’s also used as an Employer Identification Number. A sole proprietorship must get an EIN if it wants to hire employees. It will need this EIN for its hiring forms as well as to pay payroll taxes. Most sole proprietorships should consider getting an EIN regardless, as they are allowed to do so, and they may need one in the future.

Apply for a Tax ID (EIN) Number
Apply for a Tax ID (EIN) Number

 

Written by Maurice Mallory

Gov Easy LLC is an Authorized E-File Provider and helps clients obtain Federal Tax ID Numbers from the IRS. We are a business-to-business (B2B) application assistance and filing service and are not affiliated with the IRS or any other federal or state organizations. We do not provide legal, financial or other professional advice. We are not a law or an accountancy firm nor are we affiliated with either. Users are able to obtain a Tax ID number on their own by working directly with the IRS, but they will not be able to use the streamlined application process or engage with e-mail support.