Perhaps you have started a business or even thought of starting one at some point. It is sure that you must have come across the term EIN at least once.
So, what actually is it? And, more importantly, can you get an EIN without creating an LLC? Well, yes, indeed, you can, but let’s learn this in more detail so that you know how and why this happens.
What is an EIN?
An Employer Identification Number, also commonly abbreviated as an EIN, is a nine-digit Internal Revenue Service number unique to the business. More appropriately, it can be described as the Social Security Number of your company.
The IRS uses this number to identify your business for taxation purposes. You will need an EIN if you anticipate hiring employees, opening a separate bank account for your business, or filing business taxes.
This is a bit misleading since the name suggests that only employers must get an EIN. However, in reality, most types of businesses, whether they employ someone or not, may have a need to obtain an EIN.
Do I Need an LLC to Get an EIN?
You might be asking, do you need an LLC in order to get an EIN? Nope, you don’t. An EIN can be obtained by many different types of entities, not just LLCs. So, some examples of entities that can apply for an EIN include the following:
- Sole proprietorships
- Partnerships
- Corporations
- Non-profits
- Trusts and estates
- Government agencies
So, simply having an LLC isn’t enough to obtain one, but you might want one should you not be forming an LLC.
Why You May Need an EIN
Even if you do not create an LLC, there are many other reasons you might wish to have an EIN:
- You will hire employees: You must report various information, including the amount of taxes you withhold and other types of employee-related data to the Internal Revenue Service, so you must obtain an EIN.
- You open a business bank account: Sometimes, a bank will require you to have an EIN to open a business bank account. It’s really a good idea anyway to keep your business and personal money separate.
- Business tax filing: Even as a sole owner, you might be expected to file some tax reports under an EIN. For example, if you are an employer or manage a retirement plan, the IRS mandates the use of an EIN.
- Building business credit: In most cases where credit is needed, each credit-granting institution will ask for an EIN as part of the application process.
- Privacy protection: Using personal SSNs might be allowed if an individual runs a business individually as a sole proprietor. An EIN would assist in protecting one’s privacy since an EIN may be used in place of a personal SSN for various documents concerning a business.
How to Get an EIN Without LLC
It is pretty easy to get an EIN without an LLC. Follow these step-by-step procedures:
- Determine Your Business Form: You will have to indicate the form of business you are operating before you apply. Are you a sole proprietorship, a partnership, or a corporation? The IRS will need that from you when making your application.
- Provide Basic Information: While filling in basic information about yourself and your business, add:
- Name
- Your SSN/ITIN
- Business name
- The type of business you run.
- Apply for the EIN: An EIN can be applied for in several ways:
- Online: You can apply for an EIN through the IRS website, and you will get your number immediately.
- By mail: Download the Form SS-4 and send it to the IRS. You can complete it accordingly.
- By fax: Fax the IRS a copy of Form SS-4 and wait to get your EIN by return fax.
- Get your EIN: After the IRS processes your application, they will give you an EIN. It is now the identification number for taxes for your business.
Is an EIN the Same as a Tax ID?
The easy and fun answer is yes. For most people, the terms are used interchangeably. The term “Tax ID” is often used instead of EIN. Both refer to the same nine-digit number assigned by the IRS to businesses for tax purposes.
Other types of tax identification numbers, however, are also referred to as Tax IDs but have different uses, such as a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN).
When You Don’t Need an EIN
While an EIN can be very helpful, not every company will need one. For instance, if you are a sole proprietor and will not have any employees, you may simply use your SSN on tax forms instead of applying for an EIN.
However, there are several reasons you may want to get an EIN even if you are a sole proprietor.
Advantages of Having an EIN Even Without an LLC
Even when not having an LLC, there are still many benefits of having an EIN.
- Keep personal and business accounts separate: Using the EIN is all you will be required to have in order to open a business bank account, or generally known as commercial banking. This account will help separate your personal account from your business account.
- Professionalism: All business transactions when applied with the EIN instead of the SSN will make your business look more professional and legitimate.
- Easier tax reporting: An EIN can make reporting taxes easier, especially if your business grows or gets more complicated in the future.
Conclusion
In short, can you obtain an EIN without having an LLC? Absolutely! Regardless of running a sole proprietorship, a nonprofit, or managing a trust, you can file for an EIN regardless of an LLC.
It’s a pretty straightforward process with many benefits, such as confidentiality and opening a business bank account.
If you’re serious about running a business, however big or small, or just starting, then getting an EIN is worth the process. It is one of the very simplified steps to make your business operations more manageable in the long term.
If you do have other questions, you may want to contact the IRS or a tax professional to get the best answer for your business.
For further assistance with EIN applications, check out our EIN page. Also, you can check for more information on the IRS.
Want to know more about the process? Throw your questions in the comments below!