When a Sole Proprietor Does Not Need an EIN

Oct. 5, 2025, 4:57 p.m.
When a Sole Proprietor Does Not Need an EIN?
Sole Proprietor Does Not Need an EIN

When a Sole Proprietor Does Not Need an EIN

You don’t need an EIN if:

  • You have no employees

  • You don’t file excise or pension plan tax returns

  • You operate under your own legal name (not a separate entity)

  •  In these cases, you can simply use your Social Security Number (SSN) for tax and banking purposes.

Example:
Jane operates “Jane’s Handmade Candles” as a one-person business with no employees. She reports her income on Schedule C of her personal tax return using her SSN — no EIN required.

When a Sole Proprietor Does Need an EIN

You must get an EIN if:

  1. You hire employees (even one part-time worker)

  2. You file excise tax returns (e.g., for alcohol, tobacco, or fuel sales)

  3. You maintain a qualified retirement plan (Keogh, SEP, etc.)

  4. You withhold taxes on income (other than wages) paid to a nonresident alien

  5. You incorporate, form a partnership, or set up an LLC (changes your tax structure)

Why You Might Want an EIN Even If You Don’t Need One

Even if you’re not required to have an EIN, there are strong advantages to getting one:

✅ Business Banking — Many banks require an EIN to open a business checking account.
✅ Privacy Protection — You can use your EIN instead of your SSN on invoices or W-9 forms.
✅ Business Credibility — It signals professionalism and helps establish business credit.
✅ Future-Proofing — If you plan to hire employees or expand later, you’ll already be set.