LLC and EIN: do you need them, and how to get them

In the US you can legally start selling as a sole proprietor using your own name and Social Security number. Many sellers form an LLC once they have steady sales, and get an EIN (a free tax ID number) to keep business and personal details separate. This guide is general information, not legal or tax advice. Rules differ by state and country, so check with your state or an accountant for your situation.

• Sole proprietor: no setup, no filing fee. You and the business are the same person legally, so business debts and lawsuits can reach your personal assets.
• LLC (limited liability company): a separate legal entity you register with your state. It can help protect your personal assets if the business is sued or owes money, as long as you keep business and personal money separate. By default, a one-person LLC is taxed like a sole proprietor (profit goes on your personal return).

An LLC is not a tax trick by itself. The main reasons sellers form one are liability protection, looking more established to partners, and some banks or platforms preferring it.

You file "articles of organization" with the state where you do business. State filing fees range from roughly $35 to $500 depending on the state, and many states also charge a yearly report fee. Some states cost more to keep: California charges every LLC an $800 minimum franchise tax each year, including the first year for LLCs formed in 2024 through 2026.

You can file directly on your Secretary of State’s website. Formation services charge extra for the same filing; they are optional.

• Pick a name that is available in your state (search the Secretary of State’s business database)
• Name a registered agent: a person or company with an address in the state who accepts legal mail (you can be your own if you have an address there)
• File the articles of organization and pay the state fee
• Write a simple operating agreement (who owns it and how decisions are made), even if you are the only member
• Get an EIN (below)
• Open a separate business bank account and use it for every sale and expense
• Check if your city or county needs a business license

An EIN (Employer Identification Number) is a 9-digit tax ID from the IRS for a business. LLCs, partnerships, corporations and anyone with employees need one; sole proprietors can get one too, so they do not have to hand out their Social Security number.

Applying is free. Apply directly with the IRS online and you get the number right away when you finish. To apply online, your business must be in the US or a US territory, and the responsible person needs a valid SSN, ITIN or EIN. The online session times out after 15 minutes without activity, so have your details ready. International applicants can apply by phone, fax or mail with Form SS-4.

Official page: https://www.irs.gov/businesses/small-businesses-self-employed/get-an-employer-identification-number

Be careful with websites that charge to "get your EIN": the IRS never charges for it.

When you connect Stripe on the Payouts page, Stripe asks whether you sell as an individual or a company. Choose company and enter your LLC name and EIN if you have them, or individual and your own details if you are a sole proprietor. Payouts go to the bank account you add there, so use your business account once you have one.

Most countries have a simple self-employed or sole-trader registration and a separate limited-company option. Look for your government’s official business registration site, and be wary of paid "registration" services that charge for free forms.