Benefits of a Sole Proprietor EIN
Having a Sole Proprietor Tax ID, also known as a Sole Proprietor Employer Identification Number (EIN) clearly shows you are an independent businessperson, not an employee, which can make you more attractive to prospective clients.
Not only is a Sole Proprietor Tax ID Number sometimes required, but a Sole Proprietor Tax ID is beneficial.
A Sole Proprietor EIN is required if you want to hire employees. Once you become responsible for withholding taxes from employees, the IRS requires a valid Tax ID Number. Many banks also require an EIN to open business accounts. If you want to keep your business and personal funds separate, you probably need to apply for a Sole Proprietor Tax ID Number. Other situations requiring a Sole Proprietor EIN is filing bankruptcy and Keogh retirement plans.
Although a Sole Proprietor can use their Social Security Number for tax returns, many Sole Proprietors are applying for the 9-digit EIN for protection. Using your Social Security Number with multiple clients increase chances of identity theft, these concerns simply do not exist with a Sole Proprietor Tax ID Number.