Do freelancers need an LLC/corporate entity?→

Jake Poinier (aka: Dr. Freelance) answers a reader question on LLC/corporate entities for freelancers on his blog:

I am a big believer in forming a legal entity for your freelance writing business at the outset. A next step includes getting an Employer Identification Number (EIN) rather than using your Social Security number–it takes only a few minutes and it’s smart practice with today’s concerns about identity theft. Finally, with those in hand, you can get a separate business bank account. I know that there are freelancers who are successful without going through the formalities, but you need to do what makes sense for your own situation.

And:

There are a couple of reasons I recommend establishing a formal freelance writing business structure: 1) It makes the business more “real” to you and separates your personal and business finances, 2) it signals clients that you are serious about being in business, 3) it offers clients assurance that they don’t have to be concerned about crossing the independent contractor/employee line, because that is something the government is cracking down on to increase their tax haul. Uncle Sam prefers payroll employees–biweekly checks are a far steadier income source than those of us in the 1099 brigade. Theoretically, it’s also liability protection, but that’s something to address with your friendly attorney, in case your business warrants additional coverage.

Even if you don’t form an entity initially, at least get a EIN (Tax ID) just for your business activities so you don’t end up giving out your SSN to clients… It was one of the first things I did because there was no way I was going to be handing out my SSN to clients … when I’m doing information security consulting (among other things) for them. :-)

It was a pretty simple online process a few years ago and I think I even got it instantly (which was good because I needed it for a new client request that day, ha!)

It  looks to still be the same online application process to get an EIN from the IRS.