Sole proprietorship EIN: when a one-owner business needs one

Sole proprietorship

Definition

A sole proprietorship is an unincorporated business owned by one person. It is the simplest form of business organization to start and maintain. The business has no existence apart from you, the owner. 

Its liabilities are your personal liabilities, and all your assets are at risk for the business, whether or not you use them in it. You report the business’s income and expenses on your own tax return. 

For more information on sole proprietorships, see Publication 334, Tax Guide for Small Business.

Form(s):

A sole proprietor reports profit or loss on Schedule C or Schedule F of Form 1040, U.S. Individual Income Tax Return. 

A sole proprietor may also have to file other returns (such as employment or excise tax returns).

You will need a new EIN if any of the following applies:

– You file for bankruptcy under Chapter 7 (liquidation) or Chapter 11 (reorganization) of the Bankruptcy Code
– You incorporate
– You are a sole proprietor who takes in partners and operates as a partnership – You set up a pension, profit-sharing or retirement plan

You do not need a new EIN if any of the following applies

– You change your business name
– You change your location or add locations (stores, plants, businesses or branches)
– You run several businesses (including stores, plants, businesses or branches)

Note: If you are a sole proprietor doing business as a limited liability company (LLC), you do not need a separate EIN for the LLC unless you must file employment or excise tax returns. 

A limited liability company is an entity formed under state law by filing Articles of Organization as an LLC. An LLC owned by one individual is automatically treated as a sole proprietorship for federal income tax purposes (this is known as a disregarded entity, one not treated as separate from its owner). 

Report the LLC’s business activities on your Form 1040 using Schedule C or Schedule F.