What Is an EIN and Why Does It Matter
An EIN, which is also known as a Federal Tax Identification Number or Tax ID, is a unique nine-digit number given to your business by the IRS. It’s kind of like a Social Security Number, but for your company. Just as your SSN identifies you as an individual, your EIN identifies your business for tax and legal purposes.
When you start a business, you might need an EIN. This number helps you keep your personal taxes and business taxes apart. You may also need it to open filing taxes, opening a business bank account, or applying for licenses.
Is an EIN Required to Start Retail Arbitrage on Amazon?
If you’re planning to start a retail arbitrage business on Amazon, one of the first questions you might ask is: Do I need an EIN? The short answer is, not always.
When you’re just getting started as a sole proprietor, you can usually sell on Amazon using your own name and Social Security Number (SSN).
A lot of people begin like this when they just want to try out retail arbitrage on a small scale or as a part-time job, but as your business grows, getting an EIN becomes much more important.
EIN vs. SSN: Which One Should You Use for Retail Arbitrage?
If you’re operating your retail arbitrage business as a Single Member LLC or planning to create an Amazon LLC, you might be wondering whether you need an EIN.
If you’re just starting out as an individual seller, you might be able to use your SSN for tax purposes. Even in that situation, it’s a good idea to get an EIN for Retail Arbitrage because it keeps your business money separate from your personal money and makes you look more professional, especially when using platforms like Amazon or applying for a sales tax permit. For more insights, check out Do You Need an LLC to Sell on Amazon to understand whether setting up an LLC is right for your Amazon business.
When Should You Apply for an EIN as an Amazon Seller?
Getting an EIN is an important step when starting a business. But how do you know when it’s the right time to get one? There are specific situations that clearly indicate you should consider obtaining an EIN.
- If You Have an LLC Alone and Choose S-Corp or C-Corp Taxes
When you start a LLC by yourself, the government usually treats your business as part of your personal taxes. But if you decide to treat your LLC like an S-Corporation or C-Corporation for tax purposes, your company becomes separate from you, so you’ll need an EIN.
- LLCs with Two or More Members
If your LLC has two or more people who own it and you haven’t chosen to be taxed as an S-Corp or C-Corp, the government sees your business as a Partnership automatically. Partnerships need their own EIN number. You’ll use this EIN to file taxes and keep your business money separate from your personal money.
- Businesses That Are Corporations or Partnerships but Not LLCs
If your business is an S-Corp, C-Corp, or Partnership—even if it’s not an LLC—you must have an EIN. This is because the government sees these businesses as separate from their owners. An EIN helps the government track your business taxes and activities.
- If You Plan to Have Employees
When your Amazon business grows, you might want to hire people to help you. If you do, you’ll need an EIN to handle payroll. Payroll means paying your employees, taking out the right taxes, and reporting them to the government. An EIN helps you do this the right way and follow the law.
- Opening a Bank Account or Getting Business Loans
For retail arbitrage, most banks need you to have an EIN to open a business bank account. Having a separate account keeps your business money separate from your personal money. If you want to get a business loan or credit line, lenders usually ask for your EIN to make sure your business is legally registered and separate from your personal finances.
Benefits of Having an EIN for Your FBA Business
If you’re running an Amazon FBA business, getting EIN is one of the smartest moves you can make—and the benefits might surprise you!
Makes Tax Time Much Less Stressful
Having an EIN keeps your business money separate from your personal money. This makes tax time easier because you won’t have to sort through mixed expenses. You’ll be able to:
- Track your business income easily
- See your business expenses clearly
- Claim tax deductions without confusion
- Avoid problems if the IRS ever checks your taxes
Let’s You Hire Help When You Need It
If your retail arbitrage business grows and you need to hire employees, you’ll need an EIN. It’s required for paying workers, taking out taxes from their paychecks, offering benefits like health insurance, and filing the correct tax forms.
Makes Banking and Money Management Easier
When doing retail arbitrage, most banks will require an EIN to open a business bank account. Having a separate account is important because it keeps your personal and business money separate, looks more professional, makes it easier to accept credit card payments, helps when applying for business loans, and makes tracking your business expenses much clearer.
Builds Credit for Your Business
Having an EIN for Retail Arbitrage helps build credit that’s separate from your personal credit. This is useful because business credit cards often need an EIN, you can get better interest rates on loans, suppliers may offer better payment terms, financial issues in your business won’t affect your personal credit, and as your business credit improves, you’ll qualify for better financing options.
Helps If You Want to Sell Internationally
If you want to sell your products in other countries, having an EIN makes it easier. It helps you open accounts with foreign banks, handle international tax forms, deal with customs, work with business partners abroad, and sometimes get tax breaks between countries.
Makes Your Business Look More Professional
Having an EIN instead of using your personal Social Security number makes your business look more professional. It protects your identity, makes your business seem more official, helps customers and suppliers take you seriously, keeps your SSN private, and makes selling your business easier in the future.
Do Hobby Sellers or Beginners Need an EIN?
If you’re just starting to sell online or doing it as a hobby, like buying a few products and selling them for fun or to make some extra money, you usually don’t need an EIN. In this case, you can simply use your SSN when needed, especially for basic tax purposes.
EIN Requirements for LLCs, Sole Proprietors, and Partnerships
Getting an EIN is important for keeping your business and personal finances separate and following tax laws. Here’s a simple breakdown of when you need an EIN based on your business type:
| Business Type | Do You Need an EIN? | When Do You Need One? | Important Forms |
| Single-Member LLC | Not needed unless you hire employees or file excise taxes | If you hire employees, open a business bank account, or your state requires it | Use Form SS-4 to get an EIN if needed |
| Multi-Member LLC | Yes, always needed | Always needed because it’s considered a separate business entity | Use Form 8832 if choosing to be taxed as a corporation |
| Sole Proprietorship | Not needed unless you hire employees or file excise taxes | Needed if you hire employees or apply for business licenses | Use your SSN or get an EIN with Form SS-4 |
| Partnership | Yes, always needed | Always needed because it’s treated as a separate business for tax purposes | Use Form 1065 for tax returns |
| Husband and Wife LLC | Depends on state laws | In some states, it can be treated as one entity or a partnership | If not in a community property state, file as a partnership |
How to Apply for an EIN Step-by-Step
Getting an EIN for Retail Arbitrage is completely free and only takes about 10 minutes to do online through the IRS website. Here we will walk you through the step-by-step process of applying for an EIN online through the IRS website:
Prepare Your Business Information Before Starting
Before starting your application, make sure you have the following:
- Internet access and a compatible browser
- Basic information about your business structure
- Personal details like your SSN
- Details about the business entity (e.g., LLC, corporation, sole proprietorship)
- Reason for applying for an EIN (e.g., new business, hiring employees)
Access the IRS EIN Application Portal
Go to the IRS website, find the Online EIN Application page, and click the “ Apply for an Employer ID Number (EIN)” button.
Select Your Business Structure
Choose your business type from the options: LLC, Sole Proprietorship, Partnership, or Corporation (C-Corp or S-Corp). If you pick LLC, specify if it’s single-member or multi-member, then click “Continue.”
Provide Business Details
Depending on your choice, you will be asked to enter specific information, such as:
- Number of members (if LLC)
- State of registration
- Reason for applying (e.g., new business, banking purposes, hiring employees)
Enter Responsible Party Information
The responsible party is the person in charge of the business, usually the owner or main officer. Enter their personal info, including SSN or ITIN.
Business Location and Contact Information
Enter your business address and contact info. Make sure everything is correct to avoid any issues with future correspondence.
Review and Submit the Application
Review the summary of your application to make sure everything is correct, then click “Submit” to finish.
Receive Your EIN
If the application is successful, your EIN will be generated instantly on the screen. You can download, print, and save the confirmation notice.
Common Mistakes New Sellers Make About EINs
Here are the common EIN mistakes new Amazon sellers make:
- Not Getting an EIN When Needed: Some sellers skip getting an EIN even when they need it, like when hiring employees or opening a business account.
- Using SSN Instead of EIN: Some sellers use their personal SSN instead of an EIN, mixing personal and business finances.
- Not Updating EIN Info: Sellers forget to update EIN details when their business changes, causing compliance issues.
- Choosing the Wrong EIN Type: Picking the wrong business type when applying for an EIN leads to tax problems.
- Losing EIN Documents: Misplacing the EIN confirmation makes tax filing and loan applications harder.
- Using Personal Accounts: Even with an EIN, some sellers use personal bank accounts, making bookkeeping messy.
- Using One EIN for Multiple Businesses: Sellers think one EIN works for multiple businesses, which is incorrect and risky.
EIN and Amazon Tax Interview: What to Expect?
If you want to get paid as an Amazon seller, you must complete an online tax interview to provide your taxpayer information. This step is required to comply with U.S. tax laws and to ensure Amazon can pay you correctly. An EIN for Retail Arbitrage is needed if your business structure requires it, like partnerships, and the IRS uses this number to verify your identity.
To complete the interview, log in to your Amazon Seller or Associates account, go to Account Settings, and select “View/Provide Tax Information.” Click “Take Interview” and enter your business details, including your EIN. Make sure your information matches IRS records to avoid delays. Once submitted, you can track the status in your account.
Final Thoughts: Do You Really Need an EIN?
If you are starting a retail arbitrage business, especially on Amazon, you may wonder whether you really need an EIN. The answer depends on your business setup and future plans. If you’re just selling a few items as a hobby, using your SSN might be enough. However, if you plan to grow your business, hire employees, open a business bank account, or operate as a partnership, getting an EIN for Retail Arbitrage is essential. It not only helps separate personal and business finances but also makes your business look more professional and organized.
3 replies on “Do You Need an EIN for Retail Arbitrage?”
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