About two years ago, I began building a side business doing IT consulting, which never actually took off because I got so busy with my day job. In the process of building the side business, I opened a business account at the same bank that manages my personal account and I seem to recall they wanted me to have both a Tax Identification Number (TIN) and a Fictitious Business Name before I opened the account (honestly, I don't really remember). I applied for my Fictitious Business Name through the Los Angeles County clerks office and, once that was filed, I contacted the IRS to get my TIN and they gave me my Employer Identification Number (EIN), that was filed under my name, along with the name of the business I was starting at the time.
That was two years, since then, I haven't earned a penny from that business (since I never actually started it) and I haven't done a single thing with my EIN or Fictitious Business Name. I still have both and I've moved to Austin, TX to start a new business as an independent mobile application developer. I'm once again at the process of building a completely different and new business, starting with opening a business account at my bank to keep my finances organized. I've decided to operate as a DBA since I don't need to incorporate, but I'm still really fuzzy on the concepts of TINs and DBAs. My questions are...
I'm clearly confused and I thank you so much for you wisdom! Sorry for lengthy post, I tried to keep it concise :)
Independent Contractor DBA EIN Sole Proprietorship
but can I keep the same EIN and use it for my new business?Short answer: Yes (see this reference )
Long answer: An EIN exists for the life of the business. So as long as that business exists you can use that EIN. If you change the name of the business you can still use the same EIN, because technically it is the same business – it’s just operating under a different business name. However, you will need a different EIN for each business entity you own. So for example, if you are the owner of two LLCs, you will have to apply for two EINs, one for each LLC. Sole-Proprietors are treated a little differently though since they are not recognized as legal entities. A sole-proprietor is basically an individual.
Can anyone explain to me what it's used for?Since you will be operating as a sole-prop, there is no official entity associated with your business operations. A DBA (Doing Business As) is the name you will be using when performing services as part of your business. It is what you will use anytime you are representing your business. It’s the name people will know your business as. Note that you can use DBAs for incorporated entities as well.
You will use your DBA for things like: opening up a bank account, creating invoices, advertising, business cards, and stationary.
The definition from Wikipedia :
The phrase "doing business as" (abbreviated DBA or d/b/a) is a legal term, meaning that the trade name under which the business or operation is conducted and presented to the world is not the legal name of the legal person (or persons) who actually own it and are responsible for it.
The distinction between an actual and a "fictitious" name is important because businesses with "fictitious" names give no obvious indication of the entity that is legally responsible for their operation.
Do I even need an EIN or could I have just used my SSN all this time since they're both considered TINs?As a sole-prop you do not need an EIN. You can conduct business using your SSN, since there is no separate legal entity (you are your business entity). However, I would recommend using your EIN. If you don’t get an EIN, you have to use your SSN instead. For security reasons, it’s best to keep your SSN private.
Would using one over the other simply my tax filings?No.
Do I have to use one over the other now that I have both?Again, for security reasons you want to use your EIN.
I'm neither an accountant nor an attorney, so all the usual stipulations apply.
It sounds like your previous venture (which never got off the ground) was essentially a sole proprietorship with a fictitious (DBA) name. The IRS website states that a sole proprietor doesn't have to get a new EIN simply on the basis of changing either the business name or location. You should be able to continue using the same EIN and can just inform the IRS of the new business name.
I would provide ad networks with the EIN. Why have your SSN unnecessarily floating around out there?
Personally, I've never operated a business as a sole proprietorship. I think making your business a separate legal entity is generally a good idea. Filing your own incorporation papers isn't as scary as you would think. I did it myself for the first time with help from a Nolo book and have never looked back. Even if you want to get some tax benefits on your personal return (say, to offset income from a day job), I would still consider an LLC or S-Corp superior to a sole proprietorship. Nolo has some good books on how to do that, too.