#1 WHEN DOES A SOLE PROPRIETOR NEED AN EIN?

There are situations where an [EIN number](https://registeredagentva.org/) (Employer Identification Number) is legally required for a sole owner and situations where an EIN is suggested but not legally necessary. In the event that your sole proprietorship needs an EIN, it is a great opportunity to research choosing between a sole proprietorship vs a LLC.  Per the IRS, "A sole owner without employees and who doesn't record any excise or pension plan tax returns doesn't require an EIN." When you recruit employees or document excise or pension plan tax returns, you will quickly require an EIN. A sole owner with an existing EIN who becomes a sole proprietor of a limited liability company (LLC) will require one more EIN for the LLC. Do I Want an EIN for a Sole Proprietorship? In the event that you don't have employees or need to document excise or pension plan tax returns, then you aren't required to have an EIN but you could require one for different purposes. Banking, business credit, and protection are three authentic concerns while deciding the choice about whether to get an EIN for your sole proprietorship. As a Sole Owner, is My EIN Connected to My SSN? As a sole owner, your EIN is not connected to your SSN. This is one more advantage of getting an EIN regardless of whether you aren't required to do as such. For a full list of the benefits of getting an EIN, see our EIN benefit guide. Is Sole Proprietorship Still the Best Choice for My Business? In the event that your sole proprietorship is enormous enough or successful enough to recruit employees, then you could be in the position to consider changing over your sole proprietorship into a LLC. Forming a LLC is the following stage in growing a business. While being a sole owner can be an easy choice to run a business with exceptionally low profit and generally safe, you have zero liability insurance. There are many benefits to holding your business in a LLC, but the most impactful is liability security. A LLC separates the business proprietor's personal assets from the business. This means your personal assets aren't in risk if the business is sued or can't pay an obligation. You can find out ways to [form an LLC](https://registeredagentva.org/) in this guide. Why Get an EIN in the event that It's Not Required? There are several valid reasons for getting an EIN regardless of whether the IRS says it's not required: In the event that you start your business without an EIN or employees, but wind up prepared to recruit an employee, you will as of now have an EIN. Applying for an EIN instead of using your Social Security number (SSN) will keep your SSN more hidden and reduce the risk of identity robbery. Most banks require an EIN to start a business banking account. A business bank account is one more method for keeping your personal finances and professional finances separate. Just as a Social Security number tracks your personal credit, the loaning and credit agencies use the EIN to follow your business' credit. Although an EIN is not required to apply for all business loans, a ton of lenders favor a company that has established its business credit through a business bank account. Instructions to GET A FREE EIN FOR YOUR SOLE PROPRIETORSHIP The quickest and simplest way for taxpayers to get a free EIN is to apply online on the IRS website using the EIN Assistant.