Do I need an EIN to sell on Shopify? No, you do not require an EIN in order to sell on Shopify. In some circumstances, you are not required to have an EIN if you run a small or medium-sized business in the United States. Therefore, if someone wants to sell customers physical goods, they need an EIN; however, if they sell customers digital goods like eBooks or software, they don’t need an EIN.
Does a Sole Proprietor Need An EIN?
If you are the sole proprietor, you don’t need an EIN; you can use your SSN (social security number) instead of your EIN or SIN (social insurance number) for tax purposes. However, if you are running a business with multiple employees in the United States, then getting EIN is a must for you; otherwise, not.
Therefore, we discuss in detail the terms used in the above paragraph so that you can have a clear mindset when you finish this article. So, get involved in it, and it will be more enjoyable.
What Is An Ein And Why It Is Used For?
Employer Identification Number or EIN is referred to as a Tax ID or Federal Tax Identification Number. This is, generally, a nine-digit number issued by Internal Revenue Service IRS. In the United States, mainly, It is used for businesses, not individuals.
- Tax purposes
- Hiring employees
- Business credit cards
- Opening bank accounts for business
- Filing your tax returns
- For changing the business name
- For business partnership
- If you run a company with several employees
- Benefit plans for employees (Pensions and Retirement)
- To pay business taxes online
- To file an annual tax return
- For issuing tax documents to suppliers and payroll.
How To Apply For An Ein To Sell On Shopify?
Applying for an EIN is a speedy and easy method. For example, a person who wants to start a business on Shopify based in the U.S. or who lives overseas and is about to migrate to the U.S. for business purposes is required to have an EIN to sell on Shopify. However, You can get an EIN by applying on the IRS website by mail or fax; you need some information about the business you will run or already own. Moreover, this whole process is entirely accessible through the IRS. Earlier, you had to complete the SS-4 Form to apply for an EIN, but now you can also request one online instead of completing the SS-4 Form. Below are the requirements for an EIN.
- Name of the business owner
- Social Security Number
- Valid Individual Taxpayer Identification Number (ITIN) or employer identification number (EIN) of the responsible party.
Step-By-Step Guide To Apply For EIN:
|1||Do Search for the IRS website and visit it.||The EIN online application page clarifies eligibility rules and time limitations. So, Click “Apply Now” to submit.|
|2||Declare your business’s legal and tax structure.||At first, You may fill out an application as a:
Limited liability company (LLC) or Estate Partnership
|3||If your firms operate as an LLC, provide details about the persons.||You can specify the state where your limited liability company is located and the number of members.
Initially, the IRS may classify your business as a disregarded entity if you have a single-member LLC.
However, Upon initial review, the IRS typically classifies multi-member LLCs as partnerships.
|4||Explain why you request an EIN.||You can choose from the following options:
purchased operational services,
altered company type, banking needs
hired staff, or
established a new business.
|5||Specify the fully responsible party||Generally, this person is responsible for managing the business’s tax matters. Although, you may be permitted even to provide their name and SSN or Individual Taxpayer Identification Number.|
|6||Focus on providing your company’s physical address and phone number.||This can be a specific address and contact information attributed to your business.|
|7||Provide vital information about the business entity||The name of the business and, if applicable, its trade name and its founding date must be provided.
The company’s name endings should typically not be used because the legal expression should be a direct match to the articles of incorporation.
|8||Interact with a total count of tax-related queries.||You will be questioned about Alcohol, tobacco, firearms, quarterly federal excise tax returns, gambling, and vehicles on the application. Hence, The overwhelming majority of people answer “no” to each of these questions.|
|9||Must choose an appropriate business category||Generally, the application displays a list of categories indicating what your business does. Then, You can select “other” to link a supplemental options page if you cannot identify an appropriate type. If you still find a suitable alternative, you may choose the “other” and enter your response accordingly.|
|10||End up choosing the method you would like to acquire your confirmation details.||You can check your EIN via mail or online with the IRS.
When you select parcel delivery, your package should arrive in around four weeks.
Moreover, the online process often lets you look at the letter immediately.
|11||Re-evaluate your request for an EIN||Before applying, and end up making sure that every piece of data you provide is correct.|
Eligibility For An EIN To Sell On Shopify
- If your business is based in the U.S. or U.S. territories,
- You must have a valid TIN (taxpayer identification number), such as a Social Security number.
- Your primary physical business location
- Your business’s locality, such as the nation and state, along with your street and mailing addresses.
- It would be best in case of having the legal name for the company
- The full legal name of the candidate
List Of Products Which Can Be Sold On Shopify
There are some requirements to sell on Shopify, even though it is the most effective e-platform, and anyone can easily register their business there.
Some goods are restricted from being sold elsewhere, while others are allowed, as illustrated below.
|Allowed Products||Not Allowed Products|
|Products for Beauty and Health||Weapons|
|Products for Fitness and Sports||Pharmaceuticals|
|Home Office Equipment||High-Demand Items|
|Electrical products||Gaming Restrictions|
|Accessories for Cars and Bikes||Batteries|
EIN Vs Social Security Number (SSN)
|Employer Identification Number||Social Security Number|
|Specifically, EIN is used to file taxes, open a bank account, for business loans, and for payroll handling, and it’s free.||It has the same uses as EIN. It is also free.|
|It’s a 9-digit number, and its format is (XX-XXXXXXX)||It consists of 9 digit number with the format (XXX-XX-XXXX)|
|To get an EIN, fill out Form SS-4 to the IRS.||You can get an SSN by filing Form SS-5 and submitting it to the IRS.|
|EIN identifies a business||While SSN identifies a person|
|Most banks demand an EIN to open a bank account or issue a credit card.||A significant proportion of banks also require SSNs.|
|An EIN can be acquired by any corporation doing business in the U.S.||An application for a Social Security card is also accessible to temporary nonimmigrant workers with eligible visas, such as foreign nationals visiting the United States temporarily for business or study.|
What Is Sole Proprietorship?
In particular, The United States offers a wide range of businesses.
It undoubtedly depends on what possibilities you select, how you establish your goals, and how you convey them.
However, If someone starts a small business with no employees, he will surely be responsible for all losses, debts, and liabilities the business faces. So, this is the way to operate a business as a sole proprietor.
In other words, the company proprietor is personally and legally responsible for an indefinite period. A person who files a claim against such a sole proprietor could obtain both the company’s and the owner’s assets. Any small firm with a sole owner is inevitably recognized as a sole proprietorship. In like manner, a sole proprietorship can be developed without having to file any paperwork or pay any fees, unlike other business structures like LLCs, Partnership firms, or corporations.
Advantages Of Sole Proprietorship
- You are in charge.
- Start-up costs are minimal.
- As a result, You experience the uttermost privacy.
- It’s obviously simple to set up and manage your own company.
- Besides, You keep all of the earnings produced.
- If conditions change, you could easily wind up your business because changing your legal structure is simple.
- Simple procedures, as well as very little tax liability for business owners.
- After all, Less documentation is required to get started.
Disadvantages Of Sole Proprietorship
- At first, your capacity to raise money is restrained.
- This is important to realize because keeping talented employees can become more complex.
- Generally, It can be hard to take holidays.
- Although this may be true, as an individual, you have a finite time to pay taxes on your business.
- Straightaway, You are only in charge of all daily business decisions.
- In general, there is no relevant difference between personal and corporate assets. Your liability for loans is unlimited.
- With this in mind, it’s more challenging to promote your business.
- Lastly, It is harder to comprehend business expenses and as well as merchant accounts.
Need A Business License To Sell On Shopify
Is getting a license for a business a requirement in your state? If so, you must obtain a permit before selling your products or services. Otherwise, you are not required to have a business license to sell on Shopify,
What Is An LLC?
LLC stands for Limited Liability Company
An LLC offers the same limited liability as a corporate entity since it is separate from its owners. Likewise, it provides proprietors with tax benefits and managerial adjustability. Therefore, The top management of an LLC may be decided to name in the operating agreement or articles of the entire organization. Finally, they could be shortlisted on an as-needed basis.
In contrast to a sole proprietorship, LLC taxation includes the earnings starting to flow through to the owner’s tax filing. After all, the distinction is that an LLC protects the operator from business-related lawsuits and as well as debt payments.
Shopify Sole Proprietorship Vs LLC
- Unless such election processes are made concerning the single-member LLC, sole proprietorships and single-member LLCs are ordinarily taxed equitably based on income taxes.
- An LLC is considerably simpler to finance externally than a sole proprietorship.
- Moreover, sole proprietorships offer greater control than LLCs, which tend to come with far more responsibility.
- Furthermore, LLCs provide far more personal liability protections than sole proprietorships.
- Since the existence of a sole proprietorship is free. LLCs have additional costs and must be registered.
Frequently Asked Questions (FAQs)
Below are the frequently asked questions about the EIN
1. What Kind Of License Do I Need To Sell On Shopify?
Certainly, there is no license required to sell on Shopify. Furthermore, you may only need it when your Country, State or City requires it.
2. What Do You Think Shopify Reports Sales To IRS?
Basically, The Internal Revenue Service is responsible for collecting taxes in the U.S.
Yes, Shopify submits annual reports to the IRS describing all account holders and transactions in detail.
3. Does The Shopify Store Need To Collect Sales Tax?
No, Shopify does not collect sales tax on behalf of its merchants. Therefore, it’s only up to you where and when to collect tax.
4. Can We Sell Products Directly From Shopify Store?
Yes, You can sell your product (physical or online) directly from your Shopify Store on Amazon, eBay, Social Media, and as well as Wholesale. However, Shopify does not charge any fee; it only demands a processing fee.
5. Can I Sell On Shopify Without A Seller Permit?
The Shopify seller’s permit is not necessary to sell on the platform. You may need one in certain circumstances. For example, If you sell physical products subject to sales tax in your state or country, you will need a seller’s permit.
6. How Do I Get An EIN To Sell On Shopify?
Generally, you are not required to have EIN to sell on Shopify if you run small and medium-sized businesses. Whereas, as a sole proprietor, you can use your Security Service Number (SSN) or Social Insurance Number (SIN) for the purpose of taxes.
7. Selling products on Shopify is legal or illegal?
Yes, selling on Shopify is obviously legal. Because this is one of the famous e-commerce Platforms, when you start a business on Shopify, you must ensure that you have all licenses and permits for the products and services you offer. Otherwise, they have a tool named Business License Finder.
8. How Much Money Do Shopify Merchants Make?
Generally, The average amount that Shopify sellers make is $9258 yearly. However, it depends on the
type of product and the quantity of product sold, that amount could be increased as well as
9. Which Is The Best Seller Product On Shopify?
Computers and Accessories are indeed among the best-selling products of Shopify. Usually, they
have got risen in 2022
10. What Is Shopify’s Main Problem?
Shopify is a fantastic platform for e-commerce, but there are some massive problems that users must interact with. Moreover, the high transaction fees are one of the biggest problems because Shopify charges at least 2% for each purchase, which adds up rapidly, especially for businesses with increased sales.
In conclusion, Shopify is one of the great and popular e-commerce platforms. Starting a business on Shopify is much easier. Generally, Shopify is a beginner-friendly platform. Therefore, you don’t need an EIN or license to start selling on Shopify, Especially, when you have a small or medium-sized business or are running your business as and sole proprietor. So, If you don’t have an EIN, you can use your SSN instead of an EIN for tax purposes because they are both alternates. At last, visit the IRS website to get an EIN, license, or permit and submit your application accordingly. Although, there are different kinds of forms available for various purposes.