As a business owner, you may operate under a "doing business as" or DBA, which differs from the legal, registered name of your business. The fact that your business operates as a DBA does not directly affect your need to obtain an Employer Identification Number, that the Internal Revenue Service assigns. It is the structure of your business itself that determines whether or not you need an EIN.
Uses for a DBA
Sole proprietors have the option of operating their businesses under their own legal names or as a DBA. Partnerships, corporations, S corporations and limited liability companies may use a DBA to operate under other than the names that they legally registered with in their states. Businesses operating as a DBA must file fictitious name petitions and obtain fictitious name certificates. This process provides notification to the public of the true identities of the persons or corporations operating as a DBA.
Uses for an EIN
An EIN establishes separate entities for the purpose of filing federal income tax returns. Certain businesses, trusts, nonprofit organizations, farmers' cooperatives, estates and real estate investment entities must obtain an EIN. Tax returns concerning alcohol, firearms or tobacco proceeds must also include an EIN. A company or a sole proprietor that hires employees, whether temporary or permanent, must obtain an EIN. In addition, tax returns that reflect taxes withheld from income other than wages that were paid to non-resident aliens must also include am EIN.
Corporations, Partnerships and LLCs
The IRS requires businesses structured as partnerships and corporations to obtain an EIN, even if they do not operate as a DBA. The IRS does not recognize LLCs as separate entities for tax-paying purposes. Instead, a business that operates as an LLC files federal income tax returns as partnerships, corporations or sole proprietorships, depending on how they are structured. An LLC structured as a partnership or corporation must obtain an EIN. The IRS does not require an LLC that is structured as a sole proprietorship to obtain an EIN, whether or not they operate as a DBA.
Sole Proprietorships and EINs
Sole proprietors often operate under a DBA to establish separate identities for their businesses to potential customer or clients that are distinct from their personal identities. However, the IRS does not require a sole proprietor to obtain an EIN, even if she uses a DBA for her business. Instead, she would use her personal Social Security number. Nonetheless, a sole proprietor using a DBA may wish to obtain a separate EIN for the business as well, to further distinguish her business transactions from her private affairs. In addition, many banks require that a sole proprietor must present present a DBA certificate, an EIN, or both, as a condition of opening a business bank account, which is an essential element of establishing separate business credit.
References & Resources
- Internal Revenue Service: Do You Need an EIN?
- Internal Revenue Service: Employer ID Numbers -- EINs
- Entrepreneur: Doing Business As -- DBA
- Internal Revenue Service: Sole Proprietorships
- Internal Revenue Service: Partnerships
- Internal Revenue Service: Corporations
- Internal Revenue Service: S Corporations
- Internal Revenue Service: Limited Liability Company -- LLC
- Internal Revenue Service: Starting a Business
- Bankrate.com: How to Structure a Small Business