Using DBAs may be a popular business practice among entrepreneurs of many trades, but having multiple fictitious names registered to a single entity could get confusing, especially where tax liability is concerned.
Do you or your company’s fictitious name need an EIN, and if so, how do you determine which one should be used in the application? To answer this and more, let’s first unpack how EIN and DBA relate to one another in the grand scheme of things.
Understanding EINs and DBAs
An Employer Identification Number, or EIN, is a nine-digit code assigned to legal entities for tax monitoring. In practice, this number is similar in concept to the Social Security Number, but where SSN is applied to individuals, EIN functions as an identifier for business structures.
Not all organizations need an EIN, but it’s a common requirement for certain entities if they want to file taxes, open bank accounts, or hire employees. For instance, single-member LLCneed an EINs and sole proprietors can use their SSNs instead, provided they are not subject to excise duties.
A fictitious name or “doing business as” is a name used by sole proprietors, companies, or other legal entities for managing business transactions to ensure their personal security or when the registered name is unavailable in a specific jurisdiction.
As it stands, a DBA is not a separate structure but rather a legal right to use a specific name for commercial activities. Independent entrepreneurs may register such a name to give their brand more legitimacy or if to protect their personal information.
Businesses that wish to expand to other states but find their legal names unavailable in that jurisdiction may utilize fictitious names for doing business without the need to create a whole new company.
Does DBA need EIN?
Acquiring an EIN is a necessary part of business formation for specific types of organizations. As such, partnerships, corporations, and LLCs with specific tax systems are required to obtain one due to their tax liabilities. With LLCs, the number is only necessary in specific cases.
By default, limited liability companies are pass-throughs that technically follow the tax duties of other structures like proprietorships which don’t have to file federal income tax and instead report all profits and expenses on the personal returns of the owners/members.
An LLC has no choice but to get an EIN when it follows a corporate tax system, employs workers, has excise duties, or uses the Keogh plan. Even if none of the criteria applies, an LLC might still need an EIN to be able to conduct business, pay state taxes, qualify for local licenses, and even open a financial account.
But how does this all relate to the matter of DBA and its connection to the EIN requirements? As already mentioned, DBAs do not exist as separate entities. They essentially function as nicknames for legal structures or entrepreneurs that wish to avoid using their actual names for their business activities such as marketing and commercial transactions.
The truth of the matter is, a DBA has no obligations on its own but rather falls under the general requirements of the entity or individual it’s attributed to. So if a sole proprietor chooses to use their SSN for all their business activities, any DBA registered under their name won’t have to obtain an EIN, nor will it be able to as it’s not an entity on its own.
The same applies to structures that are bound by law to get an EIN. If they happen to use fictitious names, the EIN will automatically apply to all DBAs since they technically work as noms de guerre for these organizations.
Get an EIN for a DBA
The necessity of the EIN is largely determined by your tax duties. The only way to know if you or your company need it is to get the full scope of your responsibilities as an entrepreneur, whether it’s as a proprietor or shareholder or one of many members in an LLC. The EIN is automatically ascribed to any DBA registered under your or your organization’s name.
The only way to obtain it is to send the application form to the Internal Revenue Service with the following information:
- Legal name of the applicant (entity or individual);
- Fictitious names, DBAS, trade names currently in use (if applicable);
- Name of the individual responsible for tax information;
- Mailing and street address;
- Name of the owner or other responsible party;
- Entity type and structure;
- Purpose of filing;
- Date of entity formation or acquisition;
- Last month of the fiscal year;
- Estimated number of employees for the upcoming year;
- Wage schedule;
- Information about previous filings (if applicable).
There are several ways to get an EIN, though not all of them are available for international applicants. The easiest method to do it is to submit the form online. The IRS issues the number free of charge as soon as they process your online application. Not only is it extremely efficient but it will also reduce any expenses that usually go into postage or fax services.
If you prefer to work with physical copies, you can apply via fax or post by using form SS-4 for initial applications and Form 8822-B for amending the information. Fax filings are generally processed within four business days, while mail applications may take up to four weeks. If you are an entrepreneur registered outside of the country, you can only obtain it through mail or by calling the agency.
This process applies to all DBAs registered under a single company or individual, meaning you won’t need to apply for different numbers for each of your fictitious names.