sole proprietor or/and EIN

Discussion in 'Business of Photography' started by kah_hoe_wan, Aug 2, 2011.

  1. So what should a photographer getting into the business first get. EIN or sole proprietor. I know the EIN number is for file tax purposes. If thats the case then whats the point of sole proprietor.
     
  2. It sounds like you are in the United States ... right? If you don't know what a sole proprietorship is, or what an EIN is or why you might need one ... then the actual first thing you should do is talk to a CPA, or visit your local small business administration office. There are things that may be specific to your city, county, or state - and you need real advice from someone who knows all about those details as they relate to you and your locale and your business plans.
     
  3. Well put, Matt! Kah, I would definitely seek some business/legal advice from a professional in your area. IMHO, you are talking "apples" and "oranges"...a sole proprietor is a type of business structure, while an EIN is simply an IRS number used to identify a business, generally a corporation or partnership. Good luck!
     
  4. You may also check your local library to see if any Federal Income Tax information booklets are left over from the tax season. The IRS web site also will provide you with information booklets on record keeping, tax rules for small businesses, and on and on....
    You have a social security number, that is all the IRS needs for you to report your income (or losses) from your photography business. Should you start up with a partnership, or go the formal LLC route, you need to *maybe* apply for a EIN ... getting with a CPA in your area won't hurt as well.
     
  5. I would do the Sole L.L.C. get your EIN number and do your taxes that way. You can do the Sole Proprietor but to be safe and L.L.C. which isn't very pricey can keep you and your company separated. If you don't get the EIN number you can still use your SS number as the company tax number. My business partner and I like the Limited Liability Corporation LLC much better though.
     
  6. An LLC is fine, but require much more discipline and record keeping because it is a very strict no-no to mingle personal and corporate funds when running and LLC.
    A sole proprietorship makes no such demands.
    If you are just starting out, using your own name as the business name, the sole prop is much easier to get going.
    As for EIN, it's not necessary unless you form an LLC. You can use your SSN for everything as a sole prop.
    <Chas>
     
  7. Anytime one has employees, you need to have an EIN and it has nothing to do with business structure. The reason to get an EIN or Federal Tax ID is so that when you fill out all those W-9 forms, you aren't spreading around your personal SS#, which is YOUR identity, not your businesses. The IRS doesn't care really, a sole proprietor files his business report with schedule C in his regular personal income taxes using his SS#.
    In the past, many used their SS# when they were self employed but most today get an EIN to protect themselves better against identity theft. You don't need a CPA for any of this, but the questions do raise the point that having a good business advisor would be helpful.
     
  8. Charles, That's right separating you from your personal finances, this includes being sued by someone personally. If any damages occur you want to be separated from your company. You don't need to go over board with book keeping. A simple balance sheet will work or Quickbooks Account.
    John, EIN number has everything to do with business structure. You are getting the EIN number to separate your business from yourself. In a sole LLC the Employee Identification Number is used by the Sole Proprietor as the employee. Thus, if you have the EIN number you are naturally going to have a different business structure than your personal SS number with two complete different accountabilities one for you and one for your business.
    For example say you start out with a Sole Proprietor and then you want to expand your business and add another photographer and some assistances you'll need to upgrade to something else more than likely the LLC over an INC. I am self-employed and I maintain two LLC's and my personal finances.
    Hope this helps. It really isn't a big decision, it is more like where do you think you are going to take your business in the long run.
     
  9. Duane, my point is that anyone can get an EIN that is in business. Your structure is one way but I know several self employed--sole proprietors and not LLC's--who have EIN numbers so that they don't have to use their SS# in business. They still file a schedule C with their personal income taxes for their business. There are certainly certain types of businesses that require an EIN, like Corporations and Partnerships and probably others as well. But getting the number itself has nothing to do with how you decide to structure your business just that some may require one.
     
  10. John, well put! You articulated it better than I did in my first reply! Thanks for helping to clarify for the OP.
     
  11. Maybe my point isn't very clear than. The reason you LLC is to keep from having your personal assets taken in the event you are sued. Regardless of an EIN number or not LLC is the way to go here. Just my opinion of course.
     
  12. Just to clear up the LLC, there are two forms of running a business as an LLC. You can remain a sole proprietor and have an LLC. This is called a disregarded entity. Now, you'll need to speak with a CPA or attorney to decided which will work best for you. Read more here: http://www.irs.gov/businesses/small/article/0,,id=98277,00.html
    As far as what to do first, I would go the official route and form a corporation/LLC, establish a business, open the bank accounts and apply for the EIN. This will help lend credibility to your business and help separate the funds from your personal assets.
     
  13. The fact that you're asking these questions, and that you're getting a wide variety of answers, is proof that you need to follow the advice of those who say to contact a tax professional. I've worked as a tax CPA for the last 30 years, and can assure you that your individual situation will affect what you need to know.
     

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