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.
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
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