This is a great question.  Probably one of the best that I have received all week.  One thing I want to make clear is that I am not a lawyer and I am not giving any kind of legal advice, so don't take this as such.  When you are setting up a business and deciding what kind of business entity you are going to be, that is more of a legal business choice that you have to make on your own. 

I can give you some examples, and personal experience that may help you better understand my answer to this question. Again, this is one of those questions that is not "cut and dry", and does require some explaining.  I think it will benefit everyone if I am as clear as possible though.

In order for a real dropshipper to work with you, you do need a Tax ID first.  There is no way around that.  There are some suppliers that are ok with you using your social security number as well, but keep in mind that some may not (and you will have to wait for the corporation to be set up).  If they are a legitimate dropshipping business, then they will require you to have the number (Tax ID) because they are trying to keep in compliance with the laws as well.  They want to be protected, just like you should want it.  If you ever come across a "so called" dropshipping company that tries to tell you that they are making it "easy" on you by not requiring a Tax ID, then be warned right now.  You are not working with a true dropshipper, just a middle man, and your prices will not be as good.  I have even talked personally with some of these kind of "so called" dropshipping business "sales executives", and have got them to admit that you can only profit on like 15% of their goods.  What is that?  In most cases working with a company like that will not even give you as good of prices on products as you could get if going down to the local Wal Mart and just buying them. 

My thoughts about using your social security number is that it is risky business, but could be ok at first.  You are not really even in business yet, and you do not have to worry about getting sued with a brand new site that you are not even selling products yet.  However; You want to be able to protect yourself down the road (by incorporating), and using your social security number as a Tax ID means that you have set up the kind of business that is not protected (from being sued and losing your house, as an example). 

If you are wondering if there are services online (or off) that can help you, there are.  There are some companies that can help you incorporate using free corporation set up software (yes, its legit), as well as companies out there like The Tax Club that will take care of everything from forming the corporation to doing your taxes (even quarterly).  So, you have a lot of resources available to you, and here are more from the tax club.

The only reason I ever recommend to people to use a social security number to get access to products, is when they know forming a corporation is going to take months (like in California or New York) and they want to start building the site right away, and adding products sooner then later.  Just using your social security number will give you access to the products much faster and you will be able to start building your shopping cart up so much faster then waiting on the corporation to be set up.  I do (highly) recommend that you work on forming the corporation as soon as possible, so you set yourself (and business) up for better tax breaks and protection.

I hope this has helped you (even if just a little) better understand the confusing topics of Tax ID's, business entities and Social Security Numbers when starting to work with dropshippers.  Having a tax ID will help you too, if you plan on writing off all of those unexpected battery expenses that will come up with all the electronics us small business owners deal with.

If you are interested in working with a legitimate product sourcing expert, The Shipper is offering a full 7 day FREE trial to our premium product sourcing membership.  Start today, and make money tomarrow!