Do Sole Proprietorships Require an EIN?
It is not unusual for a sole proprietor to use his or her own personal social security number (SSN) for his or her company. That said, he or she should still get an EIN in order to hire employee or file excise taxes. For security and privacy reasons, it would also be a good idea to use an EIN rather than a personal social security number. Data breaches happen, and keeping personal and business finances separate is good practice.
Similarly, single-member limited liability companies (LLCs) should get an EIN number and operate under it in order to maintain their liability status, or corporate veil.
Information Needed to Complete a Tax ID Application
A business owner can file online to receive an EIN from the IRS. To receive an EIN, the following information is required.
- Full legal name
- The responsible party’s legal name and social security number
- The responsible party’s contact email and phone number
- The business’ physical address
It is necessary to start one’s business prior to getting an EIN. This is because the IRS will ask for the formation date of the business as well as the legal business name.
It is also possible to file for an EIN by fax or mail. To do this, a business owner should fill out a Form SS-4. If a business owner is submitting this form by fax, then he or she should send the application using this fax number: (855) 641-6935. If a business owner is applying by mail, then he or she should send the application to:
Internal Revenue Service
ATTN: EIN Operation
Cincinnati, OH 45999
If an EIN is Lost or Needs Verification
Authorized representatives of a company may call the IRS to confirm or verify a business’ EIN. A business owner automatically qualifies as an authorized representative. Other authorized representatives of a business include company officers, partners, sole proprietors, and trustees or executors of estates.
Luckily, the verification process is not complicated. The authorized representative will call the IRS at (800) 829-4933. After checking some identifying information, the IRS representative will provide the EIN number over the phone.
It is also possible to verify an EIN via other sources. It is true that an EIN is private information, but employers will usually be okay with confirming an EIN if requested. An EIN number is put on payroll checks and provided on contractors’ 1099s. An incorrect EIN is a problem. It can cause the IRS to reject personal or business tax returns. It can also lead to the IRS refusing requests for other information due to data inconsistencies. If this happens, then verifying an EIN is necessary to prevent understating and overstating income.
One can also verify an EIN by running a credit history. If a person has a company’s EIN and is authorized to perform a credit check, then the credit report will confirm the name of the business and the address associated with the EIN.
