Sole Proprietor Individual

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A sole proprietor is simply a person who owns a business and is personally responsible for any losses or debts. Sole proprietors may choose to operate under their legal names, or they may choose to do business under fictitious business names, also called trade names.

Sole proprietorships/individual businesses are popular because they’re simple and inexpensive to establish. However, unlike corporations and limited liability companies, sole proprietor/individual businesses are personally liable for any debts or losses.

Taxation for a sole proprietor/individual is quite simple. Because the owner is indistinguishable from the sole proprietorship, income earned by the business is equal to income earned by the individual.

 

Should a Sole Proprietor/Individual Apply for a Federal Tax ID?

While it is not required in many instances, it’s a good idea for sole proprietors/individuals to obtain what is called an Employer Identification Number (EIN), or a Federal Tax ID number.

With a Federal Tax ID number, you’ll be able to open a bank account, as well as apply for credit cards in the name of your business. In addition, you can keep your social security number private by using an EIN or Tax ID number in place of a SSN when exchanging sensitive documents with employers or other businesses.

A Federal Tax ID number, or EIN, is required if and when a sole proprietor/individual does any of the following:

  • Hires employees
  • Establishes a solo 401(k) retirement plan
  • Incorporates, forms a partnership, or starts an LLC
  • Files for bankruptcy

Don’t wait to obtain this important Tax ID number. Our online forms are quick to read and easy to navigate. Plus, we work hard to get your Tax ID number to you quickly and professionally.