The Employer Identification Number (EIN) is a 9-digit number used to identify a business for federal tax purposes. The question is, what happens to those that do business as a DBA? Find out below whether an EIN is needed by DBAs and how you can get one.
Just as Social Security Numbers are used to identify individuals for tax purposes, businesses too have 9-digit Federal Tax ID Numbers, which are also referred to as EINs. The vast majority of businesses are required to first obtain EINs to either file tax returns or make federal tax payments.
What happens if you do business under a trade name, or DBA? Perhaps you are run a sole proprietorship business that uses the DBA “Vinny’s Car Wash.” Or perhaps the business is incorporated as “VCW Inc.” and you operate under two DBAS: “Vinny’s Car Wash” and “Vinny Clean Wheels”
Do you require an EIN? If so, is it necessary to get one for the DBA or for the official name, or both?
Do You Require an EIN for a DBA?
To better understand the relationship between DBAs and EINs, you should think of a DBA in the same way you do an individual’s nickname. If your name is Vinny DeMarco, you may be called Vinny DM, but you will only have one Social Security Card that will bear the name give to you by your parents after you were born, Vinny DeMarco.
Similarly, you will apply and receive a federal (TIN) taxpayer identification number under the formal name of your business. If it is a sole proprietorship, that will be owner’s full legal name. If it is a corporation, limited partnership, or limited liability company, it will be the name listed on the formation documents filed with the state – in the above example, it is “VCW Inc.”
The reason for this is that the EIN is used for tax purposes and the business is an entity that has a tax responsibility. DBAs are simply business nicknames, which means that you don’t require a separate EIN for the DBA.
EINs are not a requirement for all businesses. Whether you need to have one will depend on how the business is organized as well as the kind of taxes paid.
Does My Business Need an EIN?
If your business is either a partnership or corporation, you are required to have an EIN. A limited liability company (LLC) may require an EIN too, depending on how it is taxed. LLCs don’t have their own tax classification, but they are taxed as if they were other types of entities. If the LLC is taxed as a corporation or partnership, an EIN will be necessary.
Businesses are also required to get EINs if they have employees, have a Keogh plan, pay excise or employment taxes, or meet any of the other criteria listed on the official IRS website.
Single member LLCs and Sole Proprietorships that don’t hire employees and don’t pay excise taxes are also not required to obtain an EIN. Instead, they are allowed to use their Social Security Numbers. However, business owners regularly discover that they still need an EIN before opening bank accounts, obtaining credit cards, paying state or local taxes. Others, still, choose to get an EIN to avoid using their personal Security Numbers for business matters.
How To Get EIN for Your DBA
You are first required to submit a form to the Internal Revenue Service before getting your EIN. On the form, you are required to offer information about the business, including how it is structured, your key business activities, and the number of employees.
You can use several approaches to apply for the EIN. Online application is the fastest option. You will receive the EIN immediately after completing and submitting the form. The other option would be to fill out form SS-4 and mail or fax it to the IRS. If you use fax, you can expect to receive the EIN via fax within 4 business days. If you apply via mail, it can take as much as 4 weeks. International applicants, on the other hand, only have the option to apply for the EIN by mail or phone.
Whether you do business as a DBA or under any formal business name, the rules for obtaining an EIN are the same. It is both free and easy to apply. All you need are one number even if you have multiple DBAs.