M/ Employer Identification Number
Even though you are a sole proprietor, you will need to obtain a separate federal Employer Identification Number (EIN) for tax withholding purposes if you hire employees to work for you. To obtain an EIN, complete Form SS-4 online at the IRS website, Www. irs. gov.
The sole proprietor is personally liable for all debts and obligations of the business. There is no limited liability as there is in a corporation or an LLC. If things go badly, you will be required to pay off creditors. In addition, there is no continuation of the business if you become disabled or die—the business simply goes away. While a sole proprietor may deduct all expenses reasonably attributed to the business from business revenues, all profits are directly taxable to the sole proprietor at individual income tax rates. Finally, since a sole proprietorship has no stock structure, it cannot sell stock to raise capital. The sole proprietor can only incur debt through loans or promissory notes, both of which need to be paid back according to the terms of the loans.
