You'll need to contact the IRS to obtain an Employer Identification Number (EIN) in several cases including if you (1) plan to hire any employees; (2) have a Keogh Plan; or (3) plan to withhold income tax. An EIN, is filed for on Form SS-4 and identifies your business for tax purposes in much the same way that a Social Security number identifies you as an individual. If you have several sole proprietorships and you need an EIN, you'll use the same EIN for all of them.

If you're a sole proprietorship without employees, however, and you don't fall into the other categories above, you can simply use your Social Security number — remember that you're not an employee of the business in this case and that the business's income and expenses are actually your income and expenses. If you change your sole proprietorship to a partnership or corporation, however, or you fall into the categories above (hiring employees, etc.), you'll need to file for an EIN.

In Canada, you may need to contact the CRA to obtain a business number. If the business will be earning a gross annual income of $30,000 (Canadian) or more, you have no choice: the business number becomes your identification for the federal Goods and Services Tax (GST) that you then have to charge your Canada-based clients and remit back to the federal government.