As a new doula starting out on your own, there are some important business setup steps to take care of early on. One key item may be obtaining an Employer Identification Number (EIN) from the IRS. This post will explain what an EIN is, when doulas typically need one, and how to apply. I’ll also provide some bonus business setup and tax tips to help get your doula practice organized from the start.
The Basics of an EIN
Let’s start with the basics. An EIN is a tax ID number issued by the IRS that identifies your business entity. Sole proprietorships and LLCs are the most common business structures for doulas. Here’s a quick overview:
- Sole proprietorship: This is the simplest structure where you operate your business under your own name. You’ll report any income/expenses on your individual tax return using a Schedule C form.
- LLC (Limited Liability Company): An LLC is a hybrid structure that offers liability protection like a corporation but is taxed like a sole proprietorship. You’ll file either a Schedule C or basic business tax return depending on if you have an LLC with or without employees.
In both structures, you can choose to do business under your own name or adopt a “doing business as” (DBA) name. Make sure to properly register your business name with your state’s Secretary of State office for legal compliance. Regulations vary by state, so be sure to check your requirements.
Now, getting back to EINs – you’ll need an EIN whether you operate as a sole proprietorship or LLC. While not legally required for everyone depending on how they run their business, it’s smart to get your EIN right away for a few key reasons:
- Opening a Business Bank Account – Most banks require an EIN to open a separate business checking account. This helps keep your personal and business finances separate for tax and liability reasons.
- Applying for Insurance – Doula insurers may require an EIN when applying for liability coverage or other insurance policies. Having insurance in place early protects you and your clients.
- Filing Taxes – As your business grows, you may need to file quarterly estimated income tax payments using Form 1040-ES. An EIN makes the process much simpler.
- Future Proofing – If your business expands to taking on apprentices or interns, you’ll need an EIN to report wages and file employment tax returns. It’s easier to get set up from the beginning.
Some doulas apply for their EIN as soon as they finish their training and start taking clients. Others wait until they meet their personal threshold of working whatever they consider full-time hours/clients in their business. There’s no wrong time as long as you have it before insurance or tax filing deadlines approach.
Applying for an EIN
Now, applying for an EIN is free and simple. The IRS website at IRS.gov is the only official source – beware of any sites or businesses charging a fee. You’ll need basic information like your business’ legal name, mailing address, responsible party SSN, and date the business started. Plan on 15-20 minutes to complete the online form.
Once you receive your EIN, be sure to have it handy for business setup tasks like opening a bank account or procuring insurance coverage. Also keep your EIN confirmation letter in a safe place with other vital business records.
Doula Record Keeping
Speaking of records – it’s extremely important that you establish good bookkeeping habits from day one as a doula business owner. Here are a few tips:
- Choose easy-to-use accounting software like QuickBooks or Wave that integrates with major banks. Schedule time each week to keep records up-to-date.
- Track business income and expenses separately in your software or with a traditional ledger/file folder system. Itemize things like mileage, client gifts/referrals, continuing education costs, etc.
- Request invoices from any vendors or freelancers you work with and save receipts from all your business purchases in one organized place.
- Issue invoices to your clients using autobilled recurring payments through a credit card processor or invoicing platform like FreshBooks or Invoiceable. Many doulas also use doula specific products like Doulado that is a client management system that can handle invoicing and records. (Affiliate link)
- Prepare for tax time by maintaining a mileage log, income tracker and properly filing any quarterly estimated tax payments on Form 1040-ES using your EIN.
Speaking of taxes, whether you report on a Schedule C or basic business return, you’ll need to keep your business filings separate from your personal tax returns. Some professional accounting help may be worthwhile as you grow.
Finally, check out membership organizations like DONA International or your local state doula association. They often offer discounted insurance through partner providers, sample contracts and forms, continuing education, mentorship and more great business resources.
I hope this overview of EINs, business structures, and some bonus bookkeeping/tax tips helps you get your doula practice started on solid footing. Feel free to reach out if any part of the business setup process is unclear.
Looking to take your doula practice to the next level? I offer both group mentoring through Doula Office Hours as well as one-on-one coaching sessions tailored to your specific needs. Learn how my individualized mentoring can help at doulaofficehours.com.