If you’re running a business as a sole proprietor, you might be wondering whether you need an Employer Identification Number (EIN) in 2025. The short answer? It depends.

An EIN is a unique tax identification number issued by the IRS, primarily used by businesses for tax filing and banking purposes. While not every sole proprietor is required to have one, it can offer key benefits like simplified banking, enhanced business credibility, and better tax management. 

Here’s a look at when a sole proprietor needs an EIN, when they don’t, and why getting one could be a smart move for your business.

What Is an EIN and Who Needs One?

An Employer Identification Number (EIN) is a nine-digit tax ID assigned by the IRS to identify businesses for tax purposes—similar to how a Social Security Number (SSN) identifies individuals.

While many sole proprietors can operate using just their SSN, there are specific situations where an EIN is required:

  • If you plan to hire staff, you must obtain an EIN to handle payroll taxes.
  • If you transition to an LLC, partnership, or corporation, an EIN is required.
  • Some banks require an EIN to open a business checking account.
  • If you owe excise taxes or are part of specific IRS tax structures, an EIN is necessary.
  • If you want to apply for business loans or credit cards, many lenders require an EIN.

Even if you’re not legally required to have an EIN, getting one can simplify your business finances—and offer extra protection against identity theft.

Benefits of Having an EIN as a Sole Proprietor

Even if the IRS doesn’t require you to have an EIN, getting one can offer several advantages that make managing your business easier. Here’s why many sole proprietors choose to get an EIN:

  1. Simplifies Business Banking: Many banks require an EIN to open a business checking account—even if you’re a sole proprietor. Having a dedicated business account helps keep your personal and business finances separate, making tax time much easier.
  2. Enhances Business Credibility: Using an EIN instead of your Social Security Number (SSN) makes your business appear more established and professional. This can be especially useful when working with vendors, applying for loans, or building business credit.
  3. Makes Tax Filing Easier: If your business grows and you eventually hire employees or change your tax structure, you’ll already have an EIN in place. Some tax forms, such as Form 1099-MISC (which clients may send you if you’re a freelancer), may also be easier to process with an EIN.
  4. Protects Personal Information: Without an EIN, sole proprietors often use their SSN for business transactions, which increases the risk of identity theft. An EIN allows you to keep your SSN private while still complying with IRS and banking requirements.
  5. Helps Establish Business Credit: If you plan to apply for a business credit card, loan, or line of credit, the bank may require an EIN. Lenders often look at EIN-associated business credit, separate from your personal credit history, when determining loan eligibility.

While having an EIN isn’t mandatory for all sole proprietors, it provides clear financial and security advantages. But are there situations where you don’t need one?

When You Might NOT Need an EIN

While getting an EIN has clear advantages, there are situations where a sole proprietor may not need one. If any of the following apply to you, you might be fine using just your Social Security Number (SSN) instead.

You Have No Employees

If you operate completely on your own and don’t plan to hire employees, the IRS doesn’t require you to have an EIN. You can report business income on your personal tax return (Form 1040, Schedule C) using your SSN.

You Don’t File Business-Specific Taxes

Certain types of businesses must file excise tax returns or retirement plan tax returns, both of which require an EIN. But if your business doesn’t fall into these categories, you can likely operate without one.

You Use a Personal Bank Account for Business

Some sole proprietors keep their business and personal finances together in the same bank account. While not ideal for bookkeeping, it means an EIN might not be necessary—though many banks strongly recommend opening a separate business account.

You Have No Plans to Apply for Business Credit

If you don’t need a business loan, credit card, or line of credit, you may not need an EIN. Many lenders require an EIN to verify business identity, but if you don’t plan on borrowing, it’s not a strict requirement.

Your Clients Don’t Require One

Some businesses and freelance clients prefer to work with vendors who have an EIN for tax reporting purposes. But if you work with clients who are comfortable using your SSN on tax forms (like a W-9), an EIN may not be necessary.

If you operate a small, low-risk sole proprietorship with no employees and minimal financial complexity, you can likely function without an EIN. However, as your business grows, you may find that having an EIN makes banking, tax reporting, and financial management much easier.

How to Get an EIN in 2025

If you’ve decided that an EIN is right for your business, the good news is that applying for one is free, fast, and simple. Here’s how to get your EIN in 2025.

  • Step 1: Apply Online Through the IRS. The easiest way to get an EIN is by applying on the IRS website. The online application is available during business hours, and once completed, you’ll receive your EIN instantly.
  • Step 2: Provide the Required Information. You’ll need to enter your legal name, Social Security Number (SSN), and business name (if applicable). The IRS will also ask about your business type and why you need an EIN—such as hiring employees or opening a business bank account.
  • Step 3: Submit Your Application. If you apply online, you’ll get your EIN immediately. If you choose to apply by fax or mail, processing times can take a few days to several weeks.
  • Step 4: Use Your EIN for Business Needs. Once you have your EIN, you can use it to open a business bank account, file business taxes, apply for business credit, and hire employees if needed.

Applying for an EIN is a quick and valuable step that simplifies financial management for sole proprietors. 

Why Sole Proprietors Should Choose North One

Having an EIN makes managing your business finances easier—but choosing the right banking partner is just as important. 

North One is built for sole proprietors, offering a streamlined, low-cost solution that helps you focus on running your business. With an easy-to-use mobile platform, you can send and receive payments, manage expenses, and automate financial tasks without the complexity of traditional banks. Plus, with transparent pricing and no hidden fees, you always know what to expect.

North One also integrates seamlessly with popular accounting and payment tools like QuickBooks, Xero, PayPal, and Stripe, making it simple to keep track of your business finances. Whether you need to separate personal and business expenses, set aside money for taxes, or stay organized for tax season, North One gives you the tools to manage your money efficiently—so you can spend less time on banking and more time growing your business.

Do You Need an EIN as a Sole Proprietor?

While not every sole proprietor needs an EIN, having one can make a big difference in how you manage your finances, protect your identity, and position your business for growth. It’s a simple step that can open the door to better banking, easier tax filing, and improved business credibility.

But getting an EIN is just part of the equation—choosing the right banking partner matters too. Take control of your business finances today. Open a North One account and experience hassle-free banking made for entrepreneurs like you.