Employer Identification Number for a Sole Proprietor
A sole proprietor must have a federal Employer Identification Number (EIN )if any of the following apply:
- You have one or more employees. A sole proprietor is not an employee of his own business.
- You file pension tax returns
- You file excise tax returns (e.g., alcohol, tobacco, or firearms)
- You change your form of business. For example, from a sole proprietorship to an LLC or corporation.
Keep in mind, if you're a sole proprietor (you file Schedule C or F) and none of the above conditions apply to you, you can still get an EIN in your own name. In fact, doing so may be a wise decision. (See IdentityTheft in the box below.)
If you're a sole proprietor and if none of the conditions in the above list applies, and you choose not to get an EIN in your own name, you can use your social security number on your federal tax forms.
Where to Get Your Employer Identification Number
You can apply for an employer identification number online. It takes about 15 minutes.
If you do business with an independent contractor and pay that person $600 or more during the tax year, you're required to issue that person Form 1099-MISC. In the payer's box on Form 1099-MISC you must enter your tax identification number. This may be your social security number or employer identification number (EIN). For greater protection against potential identity theft, you're better off using an EIN rather than revealing your social security number. Apply for one online.
A Word About Schedule C and Employer Identification Numbers
If you have an EIN in your own name as a sole proprietor, enter this number on Schedule C, line D. If you don't have an EIN, leave line D blank and just enter your social security number of Schedule C.
Single-Member LLC with Employees
If you're the sole owner of a single-member LLC (SMLLC) and have employees, you must have an EIN number issued to the LLC in the LLC's name. Use this number when paying employment taxes and filing employment tax returns.
For Freelancers and independent Contractors
- Organzie your financial data into one central accounting system on the cloud
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- Pay your quarterly estimated taxes online.
- Export Schedule C to TurboTax at year-end for faster filing.
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Have an accounting or bookkeeping question? Email it to me.
- Return to the Tax Basics for Startups Table of Contents to find related links.