Regardless of your business structure (sole proprietorship, partnership, or corporation) you should apply for an EIN (employer identification number) if you want to be seen as a legitimate business.
Yes, sole proprietors can get by without one. Social security numbers are acceptable on income tax filings for persons without employees. But often those who would do business with your business, i.e. suppliers and vendors, want to see an EIN as a way to verify that you really are in business.
Your EIN will be assigned to your business by the Internal Review Service. It's your taxpayer ID, so to speak, and it will be used by federal, state, and local governments.
You will be asked for your EIN on your tax returns, your withholding forms if you have employees, your statements of quarterly income, and your local and state registrations of your business (licenses.)
On occasion, you may also be queried about your EIN by those you do business with: your bank, your wholesalers and suppliers, and possibly your sponsor if you own a franchise or an MLM.
There are several reasons why these business partners want your EIN. First, it will validate your business in their minds, as we just mentioned. They will know that you are legitimate enough to have registered with the IRS. Would someone alert the IRS to their illegitimate business intentions?
Also, if you have an EIN, your partners will know that you intend to file tax returns and do business as it should be done - by the book.
If you avoid getting an EIN, some may think you are trying to hide something from the IRS by not filing.
The process of being assigned begins with the new business filling out and sending in IRS form SS-4. Certain types of businesses can file online. You may also get assistance throughout the process by calling the IRS toll-free business help number.
You can begin the application process HERE.
