What is a sole proprietor? Simply, a sole proprietor is someone who owns a business and is responsible for any debt and or losses. Sole proprietors are allowed to operate under their legal names or business names, also known as a trade name. A lot of businesses operate under a sole proprietorship because they are inexpensive and easier to establish.
A business that operates under a sole proprietorship, tax-wise, is much simpler since the income earned by the individual is equal to the income earned by the business. Obtaining an EIN is a simple process especially if you use the website IRS-EIN-Tax-ID. Let us discuss three reasons a sole proprietor needs to get an EIN.
Opening a Bank Account
When you apply for an EIN, you can open a bank account in your business’ name. This will not only organize things much easier, but you can also keep track specifically of the exact income number your business is bringing in. This makes filing taxes much easier. You can also use this account when buying things for your business. For example, if you own a restaurant and need to order more food supplies you can use this account.
After receiving your FEIN, you can apply for credit cards using your business names which you can use for expenses also for whatever your business may need. It also helps you organize things better, so you will not use your personal credit card for business expenses.
Social Security Number
You can use your EIN or tax identification number in place of your social security number. This is much safer since you would not want someone to steal your social security number and steal your identity, ruin your credit, etc. Getting an EIN is not only easier but is much safer for you and your business.