Want to know more about an EIN and how they work with your Amazon business?
This post will go over all the cases you need an EIN for your Amazon business, and the times you won’t require one.
At the end of this article, if you want to get an EIN for your business then I’ll provide the quick steps you need to take to get one fast.
What is an EIN?
An EIN, or Employer Identification Number, as defined by the SBA, is “a unique nine-digit number that identifies your business for tax purposes.”
The EIN functions as your business's Social Security Number.
For an Amazon business, when you either are putting in your business information for the first time, or are converting your individual account status to a business, then that is when you tell Amazon your EIN.
Is an EIN always required to sell on Amazon when you start operating through your LLC?
Contrary to what you might think, you might not need to have an EIN for your Amazon account, even if you want to run your account as a business.
Let’s look at each scenario and you can find out which one matches yours and then you can act accordingly.
Times You DON’T Need an EIN for Your Amazon Account
Since this section will apply to most Amazon sellers, let’s start here.
You’re selling as an individual.
This is an obvious one.
If you’re just getting started selling on Amazon as an individual, you can sign up for an account, add your bank account details, and run the account with your Social Security number.
This has a lot of benefits:
- Start selling faster
- You can “test” selling on Amazon while committing fewer resources like incorporating
- Don’t need anything to start, you already have a bank account and Social Security
Most Amazon sellers get started on the platform this way.
Using this method works for a while until sales start to take off and things get messy, especially from an accounting perspective.
You Have an LLC But You’re the Only Member
This is the case with many sellers who are currently selling as an individual with their personal Social Security number (and sometimes their personal bank account).
At some point you realize it’s time to take Amazon seriously and incorporate.
You start an LLC, and you might even get a business credit card to keep all purchases separate from your personal spending.
At that point, if you’re aware they even exist, you will acquire an EIN.
But stop right there!
What most people don’t realize is that in this case, you still don’t need an EIN to run your business on Amazon, even though you created a business entity.
Operating under an LLC as its only member will have your business considered a disregarded entity by the IRS.
According to the Amazon Tax Information Interview Guide, “If you are a single-member LLC, enter the owner's SSN” in the Tax Identification Number field.
In summary, if you’re filling out your information on the Tax Information Interview and you’re a single-owner LLC, fill it out as if you are an individual seller.
But hold on! Again!
You may be taxed as an individual when operating a single member LLC, but this is not true in all cases.
There are a few cases you can use an EIN even when you are a single member LLC, let's explore those reasons.
Times You DO Need an EIN for Your Amazon Account
Single Member LLCs that have S-Corp or C-Corp Elections
Remember how we just said if you are the only member of your LLC, you are a “disregarded entity” and you still put yourself down as an individual within Amazon?
You can actually choose the way your LLC is taxed, and these choices and change its “disregarded” status.
This is done through an S-Corp and C-Corp election.
When you do one of these elections for your LLC, they are treated as an S-Corp or C-Corp in the eyes of the IRS.
Therefore, even if you are a single member in your LLC, when you have taken either of these elections, you will need an EIN.
If you’re wondering if you should get one of these elections for your LLC, talk with an accountant about the benefits to see if it’s worth doing for your specific business.
Each state has a different process to do these elections, a bit of research on Google and YouTube will find you a simple guide for your particular state.
You are in an LLC with multiple members
LLCs with more than one member and haven't completed either the S-Corporation or C-Corporation election are automatically regarded as Partnerships.
With Partnerships, you will need an EIN.
S-Corp, C-Corp, or Partnership Business that is NOT an LLC
While an LLC can be regarded as S-Corp, C-Corp, or Partnership in the eyes of the IRS, you can skip the LLC part and have an actual S-Corp, C-Corp, or Partnership.
These function the same way as the elected LLCs when it comes to being taxed, however in Amazon you will choose your business type appropriately in the Federal tax classification section:
That only leaves “Other” and “Trust/estate” but those are very rare circumstances most people will not be dealing with when operating an Amazon business.
How to get an EIN for your business
If you have found out that you do in fact want to move forward and get an EIN for your business, getting one is easier today than ever before.
Simply go to the IRS website page Apply for an EIN, hit the “Apply Online Now” button, follow the steps and they will send you an EIN instantly.
It’s quick, and best of all it’s free.
Conclusion
So with the information here you should know exactly when you need to use an EIN for your Amazon seller account, and when you don’t need one.
You’ll have to decide the best way to set up your business, which type of company to have, and how you want that company taxed.
There are advantages and disadvantages to each type, so talk with an expert or an accountant to help you determine which is best for you.
