What is an employer identification number and do I need one? Both are really great questions. It can be a bit confusing sometimes to understand all of the ins and outs of being self-employed.
Because there are so many possible scenarios for this topic, I will try to be as general as possible. However, you should note that I am mostly speaking to bloggers, freelancers, and the like. So, take that into consideration as you read through this post.
I should also point out to you that although I do have previous experience as an accountant and as a bookkeeper in general, I am not your accountant. My advice is based on my own experiences and opinions. You should always consult with a professional about matters that you feel are beyond your skillset. Please refer to my disclaimer for more details.
Okay, now that we have gotten the legalese out of the way, let’s get right into talking about your employer identification number (EIN) or lack thereof.
What Is An Employer Identification Number?
An employer identification number (EIN) is a number assigned by the IRS to identify your business. If you have just started your business, you may be wondering how using an EIN differs from you using your social security number.
A social security number is used to identify you, as a person, and to track your personal tax contributions. An employer identification number is used to identify contributions and actions taken on behalf of the business.
Am I Required to have an Employer Identification Number?
The IRS requires employer identification numbers if your business :
- has employees
- operates as a partnership or corporation
- files taxes for employment, excise, tobacco, alcohol, or firearms
- withhold taxes beside wages for non-resident workers
- Have a Keogh plan
- or are part of a select group of organizations. (full list can be found on IRS’ website)
Do I Need An Employer Identification Number?
So, let’s assume that you are not required to apply for an employer identification number. Does that mean that you don’t need one? Well, no.
In fact, the IRS states that you are generally likely to need an EIN simply by starting your own business. But, the need may differ depending on the type of business and how you run said business.
Types of business categories:
There are a few different types of small businesses where an employer identification number (EIN) may be of use or required. If you are running your own small business, you should fall into one of these categories – sole proprietor, partnership, LLC (both single and multi-member), or S-Corp.
As already stated, if you run a partnership or an S-Corp you must have an employer identification number.
If you are a sole proprietor or a single-member LLC, and you do not have any employees, you can probably get by for a short time without getting an employer identification number. Since both are pass-through business types, the tax responsibilities fall straight to you as an individual.
That means that you can use your social security number for most things. However, you will quickly come across normal business activities where an employer identification number is needed.
For instance, most banks will ask for your EIN when you go to set up your business checking account.
If you manufacture goods for sale, many wholesale companies require an employer identification number to set up accounts with them.
Why Blogger’s and Influencers Need An Employer Identification Number – Regardless
There is A LOT of business-related things that bloggers are not necessarily required to have but will still be better off getting. For instance, a blogging business is likely to need blogger’s business insurance.
The very nature of our business leads us into many different money making outlets. We take in advertising, partner with other companies, and even make our own products, just to name a few.
In short, we dip our toes into many venues. All of which opens us up to information sharing that a typical small business may never encounter.
If you are a blogger or an influencer, you are probably already doing sponsored posts or you hope to capture some in the near future. You may also be applying for affiliate programs and marketing companies.
All of these things are going to require you to share your personal information. Using an employer identification number can provide a safety net between you and the information that you give out.
In addition, you may eventually hire freelance workers to help assist you with your workload. Although you can use your SS number when you need to issue 1099s, again you probably will want to keep that little detail private.
When to Get a New EIN:
The IRS states at which point you will be required to get a new employer identification number. There is a whole list of scenarios that you should check out if anything ever changes within your business.
However, most of us are likely to only come to need a new number when we change our business type. For example, you may start out as a Sole Proprietor. Then, later become an LLC, and eventually change over to an S-Corp.
In short, any change of the business structure or change in ownership will trigger a need for a new EIN.
How To Get an Employer Identification Number
Getting an employer identification number is a simple process. The IRS offers several different methods for sending in an application – through the mail, by fax, or via your phone. But the easiest and most popular method is to apply online.
You can apply online through the IRS site. It takes just a few minutes and all you will need is your basic information – the name of the business, business type, address, etc. You will also want to have your social security number on hand.
About the only restrictions are the hours of operation. They only offer online applications from 7-10pm Eastern time. So, make sure to plan to do it during these times.
In summary, applying for an employer identification number is nothing to be intimidated by. It is a simple process that will provide you with a way to separate yourself from your business and to provide a layer of protection to you when submitting documents to outside entities.