An Employer Identification Number, or EIN, is a nine-digit number that identifies your business for federal tax purposes. Find out what you need if you have a DBA.
updated December 4, 2023 · 6min read
Not every business with a DBA requires an employee insurance number or EIN, but businesses with employees, multi-member LLCs, and corporations need one. To break this down further:
If a sole proprietor named Joseph Jones uses the DBA “Joe's Taco Truck," he can register his business with a Social Security number (SSN). But if Joseph expands into a multi-person business, he'll need an EIN to operate under his DBA. In general, you need an EIN for a DBA if:
Read on to learn if you need an EIN and if you should get one for the official business name, the DBA, or both.
Businesses aren't required to operate under a DBA. Consider a DBA the same way you think of a person's nickname. Someone named Joseph Jones may be called “Joey," or “JJ," but they will only have one Social Security card listing their legal name. A business can likewise operate under different names but use one EIN.
Related: Is it better to have an LLC or DBA?
Most businesses need to apply for and receive a federal tax ID under a formal name. This formal or legal name depends on the company's structure:
After a business registers with a tax ID, owners can choose to operate under one or more DBAs. Whether you pay taxes through an SSN or EIN, DBAs are your business nicknames and, therefore, you won't have a separate tax ID for a DBA.
DBAs let owners open bank accounts and credit cards under a preferred business name. They also improve visibility by helping businesses present as more professional. Finally, DBAs form a brand identity recognizable to vendors, customers, and competitors.
At the same time, DBAs don't offer financial or tax benefits in and of themselves. The monetary advantages of an EIN apply whether or not a business runs under a DBA.
Picking one or more names for your business is fairly simple. But once you've settled on a DBA, you need to formally register it. These steps include:
Related: Learn your state's DBA requirements.
If your business is a corporation or partnership, whether under a DBA or not, the IRS requires you to have an EIN. While LLCs don't have their own tax classification, LLCs need an EIN depending on how they are taxed. For example, sole proprietors and single-member LLCs without employees or excise tax liability don't have to obtain an EIN.
The IRS website dictates that you will pay taxes through an EIN if your business:
You can also decide if you need an EIN based on your company structure. Single-person businesses that don't file payroll taxes can file with a Social Security number. If you hire employees, pay payroll taxes, and file as an S-Corp or C-corp, you need an EIN.
Taxes aside, many business owners find that they need an EIN to open a bank account, obtain a credit card, obtain business licenses, or pay state or local taxes. And others choose to get an EIN to avoid using their personal Social Security numbers for business matters.
Getting an EIN for your business is a simple process:
Once the IRS issues your EIN, open a business bank account and apply for any credit cards you may need. Getting this financial groundwork out of the way will let you focus on expanding your company. When tax season comes around, you should also meet with a tax adviser who can explain EIN deductibles and benefits.
by Siege Media, contributor to LegalZoom
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