Do I Need an EIN For a DBA?

A DBA, also referred to as Doing Business As, a fictitious name, or a trade name, is a name a business uses that’s different from the legal name of the company.

It’s common for an individual who wants to start a business as a Sole Proprietor to register a DBA instead of using their legal name as the business name. Doing so protects the privacy of the Sole Proprietor and creates a degree of professionalism for the business.

A Limited Liability Company (LLC) or a C Corporation might be registered with the state as one name but operate under a DBA that better describes its product or service offerings or is a more effective marketing tool than the registered name.

An important distinction to understand, however, is that a DBA is not a legal entity, like an LLC or C Corporation. It’s simply a name under which a business operates, not a business itself. For that reason, a DBA is not required to have an Employer Identification Number (EIN).

If you want to refresh your understanding about why DBAs are important and how to register one, you can check out CorpNet’s article “What Is a DBA?”

What’s an EIN and What Businesses Need One?

An EIN is a federal tax ID number issued by the Internal Revenue Service (IRS). It’s often described as a Social Security number for a business.

Common business structures include Sole Proprietorships, Partnerships, LLCs, and Corporations. The type of business structure you have determines how you pay taxes, what kind of management you’ll have, how profits are distributed, and other factors.

If your business is a Sole Proprietorship with no employees, you probably can use your Social Security number for tax purposes and won’t need an EIN, although your bank might require one if you want to open a business bank account. Many Sole Proprietorships use DBAs without having EINs.

Business structures other than Sole Proprietorships normally do need an EIN to set up a business bank account, hire employees, file tax returns, set up a payroll, and complete other tasks that require you to identify your business. It is the legal business, however, not the DBA that the business operates as, that needs the number.

How Is a DBA is Different from a Business?

The IRS, which is part of the federal government, operates under federal tax rules that specify what businesses need EINs. Because a DBA is simply the name under which a business is operating and not the business itself, it is not recognized by the IRS.

A DBA is registered with your state or local government and is of no concern to the IRS. The legal business that you register with the state, however, is of considerable concern to the IRS, which uses your EIN to identify the business for tax purposes.

When you apply for an EIN using the IRS Form SS-4, you are not asked to provide information about a DBA, only the type of business structure you have and other information that applies to the legal business.

A business such as an LLC or Corporation can have multiple DBAs used to market different product or service lines or differentiate branding for various areas of the company. For example, an LLC called Everything Tech, LLC might offer app development, consulting services, and web design. Because it wants clients to understand it offers multiple services, it obtains a different DBA for each service line.

While customers know the business by three different names, as far as the IRS is concerned, there is only one legal name – Everything Tech, LLC – under which three DBAs operate. There are some good reasons to create separate LLCs for separate business lines, but they have nothing to do with a DBA.

Wrapping Up

Obtaining an EIN is an important step when you’re starting up a business that’s registered with the state. It is not necessary for a DBA, however, because a DBA is a name and not a business, making it irrelevant to the IRS, the federal agency that issues EINs.

Starting a business is a task not to be taken lightly, as there is a lot to understand and a lot of misconceptions about what must be done. If you need advice or help setting up a Partnership, LLC, Corporation, or other business structure, CorpNet can help.