A sole proprietor must get a separate EIN for a business if any one of these things are true: That individual wants to hire employees, wants to open a Keogh or solo 401, or chooses to file for bankruptcy protection.
Benefits of Having an EIN
Even so, you may want to obtain an EIN anyway. An EIN conveys professionalism, establishing your sole proprietorship as a credible business, not just a side gig. For instance, sole proprietor freelancers and independent contractors must provide clients with an SSN or an EIN to receive a 1099 tax form. Many clients are more comfortable doing business with sole proprietors with an EIN because they know they’re legit.
Having a sole proprietorship EIN shows clients you’re an independent contractor, not an employee, making you more attractive to businesses looking to hire. Helps you open a business bank account. Opening a business bank account helps avoid commingling funds by separating business and personal finances.
Some banks require you to have an EIN before they’ll set up a bank account for your business. The fastest and easiest way to obtain an EIN is to apply directly at the IRS website. The IRS has an EIN Assistant you can use and it’s a fairly straightforward tool.
Why and How to Obtain an EIN
Why would a sole proprietor have an EIN?
A sole proprietorship does not need an EIN. However, there are cases when an EIN becomes necessary: if you hire employees, file for bankruptcy, open retirement accounts like Keogh or Solo 401(k), or inherit/buy an existing business.
The easiest way to get an EIN is through the IRS website. The IRS has an Assistant tool that streamlines the application process.