Do I Need an EIN as a Freelancer – Freelance Taxes 101

Are you wondering, “Do I need an EIN as a freelancer?” then read on. You might be wondering, why might I even need an EIN or employer tax number if you don’t have anyone working for you. An EIN is actually more than that. The short answer to the question “Do I need an EIN as a Freelancer?” is it depends. There are some factors that you need to consider before you start trying to get an EIN. It might not be necessary but for some, it can be a must.

We always recommend to talk to a lawyer so that you’re on the safe side.

What’s an EIN? And How Is It Different From TIN?

First things first, what’s an EIN exactly? An Employer Tax Number is a unique number that is given to a business entity. This is used by businesses for tax reporting purposes. When you are a freelancer, it’s like you are a one-person business so it is possible to apply for an EIN. An EIN is used for filing and registering business taxes. It can also be used or may even be a requirement for opening bank accounts.

Now, TIN or tax identification number is also a unique number that is used for tax purposes. However, it is a broader term and an EIN is a type of TIN.

Factors to Consider for Getting an EIN as a Freelancer

Woman wearing headphones holding a pencil, sitting on a chair in front of a desk with a laptop

To answer “Do I need an EIN as a freelancer?” you have to consider important factors that will be discussed below:

1. LLC

A freelancer can make being a “one-person business” official by registering as an LLC. As a Single Member Limited Liability Company, you will definitely need an EIN. You will not be able to set up your LLC without EIN as it is one of the major requirements. An EIN is needed to maintain your corporate shield, which is one of the primary reasons why freelancers get an LLC.

Just a recap, when you register your freelance business under an LLC, this protects your personal assets. If your business ever has monetary problems, it won’t be coming out of your own pocket as an LLC separates your personal account from your business account.

Even if you are just starting out freelancing but already have a vision of becoming a bigger business in the future, it’s good to look into the EIN requirements early on.

2. Local Laws

Each country is different, you have to check the rules and regulations of your local revenue institution to know if an EIN is required when you are a freelancer. If it’s a requirement in the country you are working or residing in, then you should apply for one ASAP so you won’t have any trouble come tax season.

3. Freelance Industry

Woman typing on laptop showing Slack

Each industry in the world of freelancing has its norms. For example, if you are a photographer, it might be better to register as an LLC and you will definitely need an EIN for that. If potential clients prefer to work with “businesses” as opposed to “individuals” then you might look into getting an EIN.

Ask fellow freelancers in your industry if they have an EIN. You can also check out competitors if they are operating as LLCs. If most of them are, then you might need an EIN, too.

4. Employees

Do you plan on having other people work for you in the future? For some, freelancing is the first step to creating their own business. At one point or another, you won’t be able to handle everything on your own and you may need to get employees.

If this is something that you will do, then you will need to get an EIN. An EIN is a requirement to be able to hire employees. It is also needed so you can pay said employees.

5. Clients

Each client is different, some just want you to do the work and that’s that. Others may want to get into meetings or have an interview with you before giving you work. But there are also potential clients who will require a lot of information from you, including your TIN.

Some freelancers prefer to have an EIN on hand instead of handing out their personal TIN. Not only does this look better professionally but it can also help in minimizing business risks. If you value your personal privacy or want to avoid identity theft issues, do look into getting an EIN.

Conclusion: So, Do I Need an EIN as a Freelancer?

Tax forms and documents and a calculator

If you do have concerns with the factors discussed, then you should get an EIN. The good thing about this is getting an EIN can be fairly simple. For example, the IRS allows easy EIN registration online.

So, the question “Do I need an EIN as a freelancer?” can be answered with it depends. It’s up to you and your current situation in your freelancing journey.

If you have any doubts, it’s always smart to speak to a lawyer about any concerns.

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