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Every Partnership Needs an EIN

I recently met two individuals who formed a business partnership. They were pretty informal about the process: They had no written partnership agreement. More surprisingly, they had not obtained an employer identification number (EIN) from the Internal Revenue Service.

Failure to obtain an EIN was a legal mistake. The IRS’s Do You Need an EIN? page states that when a business is operated as a partnership, it must obtain an EIN.

Even worse, the failure was a serious business and personal mistake. When customers asked for the partnership’s EIN, one of the partners provided her social security number. As a result, at year-end the IRS will think all partnership income was earned by that partner! If her return is audited, she will have quite a bit of explaining to do.

Bottom line: If you form a partnership, get an EIN.

Related post: Beware the Unintended Partnership

Dana H. Shultz, Attorney at Law  +1 510-547-0545  dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.

Categories
Business Entities, Tax