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Identity thieves are dangerous characters that can ruin your personal and business life. Yet, we often give them the tools to do us harm. Most of the time, when identity theft occurs, it’s through social engineering, not data breaches like the recent Equifax event. Thieves go directly to individuals and using scams, get them to provide their personal information willingly.
Recently, one of America’s oldest and most respected publications, The Atlantic, got used in an identity theft scam involving freelance writers. The scammers send bogus emails to unsuspecting freelancers who they think might be looking for work at the publication. They have the freelancer (or another job seeker) go through what appears to be a legitimate hiring process, including applications and interviews. During that process of completing forms, the thieves get what they want.
The Atlantic explains what that is in a recent press release identifying the scam. “The aim of the scam is to obtain personal information such as social security numbers, addresses, and bank account information from the intended victims.”
Apparently, at least 50 people have fallen for this scam and given their social security number and other identifying information to these scammers. That, of course, means their identity got stolen and might get used for a variety of theft types. And, The Atlantic isn’t the only place where this scam is happening. Other publications and employer types are used to snare individuals into giving out their personal information.
Freelancers Easily Give Up Their Goods
This kind of identity theft is simple because many writers and other self-employed people operate their businesses under their names. They regularly provide clients with their social security numbers, addresses and even personal bank account information to get paid.
But, scammers know they’re accustomed to handing over that and other personal identity information for freelance work. One way they may figure out who those freelancers are is by going to their websites or LinkedIn profiles and seeing if they’re operating under an entity. If not, they assume they’re giving away their personal information in exchange for a check.
Ways to Avoid Giving Up Your Identity Goods
There are a few methods you can use for getting around this requirement if you’re a freelancer and I’ve used them. You may want to check with your lawyer or accountant before using what I’m going to share here in your business to make sure these work for you, though.
Register Under a Trade Name
Called a DBA or “doing business as” it’s a business name that sole proprietors can use. It’s not like an LLC or corporation (which also can have trade names). So it doesn’t offer any protection other than from personal identity theft. It’s just another name you’re using in place of your own to do business. Pick something professional and register that with your state, county or city.
It might be smart to get a business license in your trade name, too. That’s usually a separate process from registering your trade name, and most jurisdictions require business licenses for wherever you operate a business. You’ll also need it for other purposes to prove you’re a “real” business.
Keep in mind that, in some states, if you run your business from home, you may have to put your home address on your business license. It may be in a public database online for anyone to look up.
You can search online or ask your lawyer or accountant for how to do these things correctly in your state. The process and requirements can be different everywhere.
Establish a Business Mailing Address and Phone Number
It’s important to hide your home address and phone number, too. To protect your identity, you don’t want to use the phone number or home address tied to your legal name and social security number for your business. Use Google Voice or a paid app like Flyp or Sideline instead for your business phone numbers.
Then, use that business phone number on the separate business address you establish from your home address. You can rent a mailbox at a Commercial Mail Receiving Agent (CMRA) business, which is considered a “private mailbox.” Or, you can get local P.O. box at USPS.
There are a few options for your private mailbox. One is a virtual private mailbox account online from a site like Anytime Mailbox, which offers local mailing addresses in many cities across the U.S. You also can rent a private mailbox in person at a local UPS Store or similar business in your area. If your budget permits, renting a mailbox at a virtual office location also is an option, especially if your favorite co-working space offers the service.
You’ll pay monthly rental fees and service fees to get mail forwarded to your home address if you don’t pick it up yourself. (Mail forwarding isn’t an option with a P.O. box unless you close the box and fill out a forwarding form. Conversely, you can’t do mail forwarding using a postal form when you close your CRMA mailbox.)
In all cases, you’ll have to provide your real name, two forms of identification, one of them a government ID, as well as your actual home address on an application. Private mailboxes and the Postal Service have different applications. For a private mailbox, you also must complete a PS Form 1593 that the US Postal Service requires.
Research the process before you open your business mailbox account, so you know what to expect and what costs are.
Get an Employer Identification Number
Using your trade name, business mailing address and business phone number, apply for a federal employer identification number or EIN from the IRS. You will need to give your actual name and social security number when you do this but typically, not your home address. Usually, you can do it online where it’s intuitive and only takes a few minutes.
Your purpose for this is protecting your identity, and this offers an alternative to using your social security number for freelance work. But check with an accountant or experienced tax advisor for any tax implications.
Also, since this is like your business’ social security number, you should use it for all business transactions where you can use your trade name, business address and EIN. That includes on invoices and any freelance contracts you sign.
Then, when a scammer demands your social security number for an opportunity they’re offering, you’ll say, “I only operate under my trade name and use my EIN and business address to get paid freelance assignments,” and see what they say.
If they insist you need to use your social security number and personal address for their opportunity, it’s probably a scam, and you’ve just dodged a bullet.
Open a Business Bank Account
You already should be keeping your business and personal expenses separate for a whole host of reasons. But, protecting your personal bank accounts from business scammers is one, too. So, use the trade name, EIN, business phone number and business address to set up a business bank account.
You’ll have to use your legal name to open the accounts as the business’ sole owner. But, even as a sole proprietor, you may not have to use your social security number or home address to open an account with some smaller banks or credit unions.
However, expect nearly all bank personnel to tell you it is the law under the USA PATRIOT Act to give your social security number to them to open business bank accounts. What’s true is that most banks have that as their account opening policy under their Customer Information Programs. Under those programs, if you’re a U.S. citizen, the bank can require your social security number for personal accounts.
You might not get past this policy with some banks and will have t provide whatever identity documentation their policies state. Check online and call the bank and ask what their policy is before you open an account.
Even if you have to give your social security number and home address to the bank to open a business account (or don’t mind doing that), you’d still not be giving clients your regular personal account information to get paid.
On your invoice, you can have a “check mailing address” if they send checks and use your home address but have checks made out to the name on your business bank account. You also can use your business accounts opened under your EIN and trade name for ACH forms clients send.
Launch a Formal Entity
When you’re incorporated or have an LLC, all your business transactions get done through that entity and under its EIN. In the US, these entities get designated as separate “persons” under the law, even small or “close” ones owned by a single individual or a few people.
LLC’s are usually easier that corporations to set up but both entity types can be inexpensive to register in most states. You can form one of these in any state you want as long as you have a registered agent there but it’s important to use a state with good small business laws. You can Google “states with close LLC or corporation statutes” if you’ll be the sole member of your LLC or shareholder of your corporation.
Just remember to use the business address and business phone number strategy above with your corporation and get your EIN under your corporation’s name. Keep in mind different states require different amounts of personal information to set up corporations or LLCs. Some even want social security numbers.
Because you’re trying to protect your personal identity from fraud, you might want to avoid those states, even if it’s your own. Instead, consider forming your entity in a state that doesn’t require so much personal information.
If you set up a “foreign entity,” that is one outside the state where you operate your business, you’ll need to “domesticate” it in your home state. You do that by getting what’s usually called a “Certificate of Authority” for a foreign entity in your state to operate legally there. You’ll also need that if someone takes your business to court.
If you’re a journalist, blogger or content writer, you might want to talk to a media lawyer if you write controversial or offensive content. Whatever your profession, you’ll need to know what’s best for your business type or state and that’s also where an attorney can help.
Opening Business Bank Accounts with Registered Entities
One of the benefits of operating under an entity is you’re more likely to be able to open bank accounts entirely separate from your social security number using just your entity’s EIN. Try to find an online, community bank or smaller bank that won’t require your social security and personal address to be on your business account.
Since that’s not a legal requirement for business accounts, though many banks won’t let you get past their CIP requirements, it’s possible to find a business bank that will, if you commit the time. Those banks may offer better business banking services as you grow, too, because they won’t treat you as a personal account holder.
You’ll need to show your government picture ID, valid registration documents for your LLC or a corporation and your CP575, the letter the IRS provides showing your tax ID to open your account.
Opening your business accounts only under an entity’s name and EIN helps protect you from personal identity theft. By not attaching your business accounts to your social security number, it’s harder for a determined fraudster—or someone else looking for your business assets—to find your accounts with your social security.
Moreover, if there’s an Equifax or another major data breach that exposes your social security number, if it’s tied to business accounts, those business can be exposed.
While none of these tactics is foolproof by themselves, using a combination of them is the best strategy for protecting your personal identity while operating and growing your business.
(c) 2017. Dahna M. Chandler for Thrive Writing, Inc., a division of Thrive Media, Inc. All rights reserved. This article may not be reproduced in whole or in part without express written permission of the author.
* Disclaimer: This blog post uses personal experience solely to illustrate the points made here and is for informational purposes only. It is no substitute for your contacting a lawyer, tax advisor or accountant or any other qualified or licensed professional for advice on your specific business situation. Please contact those professionals and carefully review this site’s Content Disclaimer on the use of illustrative information and the application of this information to your business before using any information in this blog post to make any crucial business or personal decisions.