Many small business owners get confused as to whether they need an EIN. The secret is in what the acronym stands for – employer identification number. Clearly, this number, which is acquired from the government for tax purposes, is primarily for businesses with employees.
With that in mind, a sole proprietorship falls into one of two categories:
- You are a sole proprietor with no employees, perhaps just an occasional subcontractor, and so you do not require an EIN.
- You have even one employee on the books, which makes you an employer and requires that you get an EIN no matter how your business is structured.
Even if you have no employees, you will still have to get an EIN if you structure your business in any format other than a sole proprietorship. This is because other business formations have different rules when it comes to employees and taxes. You get some tax benefits, and the small price that you have to pay is acquiring an EIN.
The EIN separates your business and personal finances since your finances are connected to your own social security number. This also protects your personal assets should anything go wrong with the business.
Help for Small Business Owners in Southern California
Pokala Law APC in San Diego is here to help small businesses in southern California thrive. From business formation to contracts and agreements, we have the affordable solutions that you need in order to protect yourself and your new company. To learn more, call 1.844.695.1487, or you can use the online appointment scheduler to book a consultation.