A big part of the allure of starting a new business is being able to be your own boss. Rather than answering to a manager or making profits for someone else, you can reap all of the rewards of your hard work. To make things even better, managing an online company can allow you to do everything from home, too. However, since you don’t have a storefront, do you still need an EIN number? Well, it depends on the kind of business you’re running. Let’s see how it works.
Choosing an Entity Type
When starting your new home enterprise, it’s imperative that you figure out what kind of entity it will be. There are four primary options from which you can choose, but only two of them are ideal for home-based companies. Let’s make a comparison.
This entity is based on the idea that you are the only person working for your business. This means that you’re not going to hire anyone or bring in any partners to your company. For many online enterprises, this option is viable.
Since you aren’t worried about employees, you don’t have to get an EIN online. However, that does mean that your business finances will be tied to your own. This will include things like company expenses and debt.
If you’re planning on running a large company, then a C-Corporation would be a good idea. However, for home businesses, S-Corps are far more ideal since they allow income to “pass-through” to the owners and operators.
In this case, you will need an EIN, as all corporations are required to have one. This will also allow you to expand and open a merchant bank account. And, it keeps your finances separate.
How to Get an EIN
Overall, we highly recommend that you apply for a new Tax ID for your business since it will make accounting much easier in the end. Thankfully, all it takes is a little bit of paperwork and you can typically get your EIN within a day.
So, if you’re starting a business from home, you should still get an EIN. However, it’s not always necessary.