Hi Dwanna. Although a lot of sole proprieters do get an EIN, it is not necessary. I have operated my business for almost for almost 19 years as a sole proprietor and do not have an EIN (use my SSN).
For "business account," if you're referring to a business checking account, that would be a good idea. It's so much easier to keep business and personal finances separate for tax and legal purposes with separate accounts.
As Pam stated earlier, it isn't required as a sole proprietor but I have one just in case. I got an EIN for a few reasons: in case my business grows and I decide to re-structure it to an LLC, I add employees or independent contractors in the future, and to take the place of using my social security number for business related things.
Having a business checking account is always a great idea. It keeps everything separate in regards to finances. You get your own debit card and checks with your business name on it and its easy to keep track of business related transactions. I also used my EIN to open the account. If you decide to open a business checking account, make sure to look for a free one. Saving money anywhere you can is always a great idea because small fees will eventually add up into big expenses.
While totally not required, there one good reason for getting one:
If you plan on staying with a client for more than $600 in a year, then they should be issuing 1099's at the end of the year. Therefore, they will need a W9 from you. You have the option of providing your SSN or EIN on that form.
While you, as a trusted virtual professional, take extra care to ensure that all sensitive information is securely kept .. can you ensure that your client is doing the same? Maybe they just leave it out on their desk, set it in the 'To be filed' pile, etc.
That's your SSN .. not a minor little number like a phone number, number of your house, or shoe size. So protect it by getting an EIN
I agree with using the EIN number instead of a social security number.
I do really try to protect my social security by not sending it through email, fax or another
insecure means, who knows where that information ends up.
I also have a business bank account and keep my expenses separate from personal. It is also much easier, I find to balance my books at the end of the year when everything is separate. Further the IRS expects us to keep separate records as was stated here.
Susan Sheehan said it beautifully. If you decide to launch a business then treat every aspect as a business. Embracing this mindset now, from the beginning, will move you away from a hobby business and into growing something that has sustaining potential.
Like the others have mentioned I guard who is privy to my SS number. It only takes one careless person to share this for it to fall into the wrong hands and cause havoc beyond imagination.
I also use my EIN number to obtain discounts for supplies at local stores and some hotels when I travel. I would not give my social security for these benefits so the EIN is much safer and supports that I am a business owner more easily.