If you’re a sole proprietorship, you need an EIN. Well, legally you don’t need one, but in a world full of identity thieves, isn’t it nice to be able to keep you social security number to yourself? As a new business owner, an enormous number of people are asking for it these days. I find it really disconcerting to have to write it on every bank, credit, shipping and merchant service application I fill out.
An EIN, or Employer Identification Number, otherwise known as a Federal Tax ID, does not actually require you to employ anyone to get it. In fact, it’s so easy to get, you’d be a fool not to do it right now. All you have to do is visit the EIN page on the IRS’s website. You can apply in five minutes online (though only during certain hours–I have no idea why), and be instantly approved. You just print your identification page at the end of the process and you can start using it immediately for almost anything (you have to wait two weeks before using it to file your taxes). The best part? It doesn’t cost a dime.
One small note: an EIN is not what will allow you buy things wholesale, at least not in the state of California. For that you need a seller’s permit, which is a whole other kettle of fish, and is the same document that you need to collect sales tax. This requires more time and money than getting an EIN.