4 Reasons Freelancers Should Apply for an EIN (Employer Identification Number)

September 1, 2022

Another finance acronym, sick.

An Employer Identification Number (EIN) is like a social security number, but for a business.

Whether you’re freelancing without a business structure (sole proprietor) or you have an LLC, you can (and should) apply for an EIN.

Here’s why.


You can stop giving out your Social Security Number (SSN) to clients

When you work with clients, you typically have to give them a W-9 form with your information on it so they can then send you a 1099.

If you're doing business without an EIN, you have to put your SSN on every form. If you freelance for awhile, that can mean a lot of people have your Social on file.

To me, it's a little unsettling. 

✅ With an EIN, you give clients the business' “Social” so that you don't have to share your personal SSN.


You can get business bank accounts

Whether you're a full-time freelancer or you just work on projects on the side, if you're getting paid from your work, you should have separate bank accounts for personal and business things.

The reason is because when it comes tax time, you want to be able to see how much income you've made from freelancing and what expenses you incurred throughout the year that can be written off. It also makes bookkeeping MUCH easier. Then, you have accurate numbers and can make smart, data-driven business decisions.

But without an EIN, you can’t get a business bank account in most situations. To get one, you can apply through the IRS' website. 

Visit the IRS’ Guide & Application for EIN

After you have your business' EIN, the few banks that I recommend (that I've personally used) are:


You can set up tax-advantaged investment accounts

After you have profits and you’re paying yourself regularly, then you can invest & reduce your taxes with certain types of accounts.

A few of the most popular are:

  • Solo 401(k)
  • SEP IRA
  • SIMPLE IRA

If you want to learn more about how these work and which to choose, check out this post.

But the important part here is that you typically need an EIN to get access to these accounts because they’re reserved for self-employed people.

For example, here’s the description on Vanguard’s website:

You can get a business credit card

One benefit that my financial friend, Jared Machen, reminded me of is being able to get a business credit card.

While you may have been told that credit cards are bad and that you should avoid them, fortunately, this isn't true. By using a credit card for regular expenses within your freelance business, you can get cash back, travel points, potential discounts, and have the ability to dispute any out-of-the-ordinary charges.

Different cards have different perks & benefits, so I recommend doing a little research beforehand so that you can get one that aligns with your spending.

Also: Check out our financial resource library to view different card & banking options

As long as you pay it off every month and spend responsibly, a business credit card is a wonderful addition to your financial tech stack. All you need to do is get an EIN and apply to your card of choice.


The Takeaway

You don’t need an EIN to keep doing what you’re doing, but it can provide a few advantages.

It’s easy to do, it’s all online - there genuinely isn’t a downside to doing it. It’s free and if you don’t use it, it’s okay.

The IRS won’t hunt you down.

Here's a step-by-step walkthrough of the application process for one of my own businesses:

View IRS Employer Identification Number application

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