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  • Sole Proprietorship setup/EIN physical address

    I will be starting some work as a 1099 contractor this year. As a preface, I do not expect my income to be significant enough to form an S-corp as this will be a part time gig. From my understanding of what I have read, a sole proprietorship would be the easiest business setup without any increased liability (since there are no employees and I'll have malpractice insurance). If this does not sound reasonable - please let me know.
    I have called my state dept of revenue and from what I was told, I do not need to register for a business name or need a business license if I am using my name for the sole proprietorship since it is a service based business. I do want to set up a business bank account (to keep business expenses separate, pay taxes from, do solo401K contributions from, etc) for which I need an EIN. When applying for an EIN on the IRS website it asks for a physical address. Does anyone know if I would put the practice address where I will be working or my home address? I wasn't sure if this address was published publically as I really did not want my home address easily available for patients to look up.
    In terms of setup, do I really just have to setup an EIN through the IRS and then I start getting paid into my "business" checking account and do quarterly tax witholdings, etc. It seems like there should be more setup involved than just registering for an EIN and making a bank account (which I technically don't need, i think). I know this all seems really basic, but I just wanted to make sure I am doing this correctly as it seems too simple or like I am missing something. Thanks!

  • #2
    First, an EIN is only a policy requirement of "some" one-participant 401k plan providers. The IRS only requires one when you need to communicate with them. Such as when you are required to file Form 5500-EZ if/when your year-end balance is > $250K.

    Even if you want to maintain separate financial accounts (best practice) for the "business", there is no requirement for those to actually be business accounts.

    To the IRS there is no difference between a sole proprietorship and it's owner. You file taxes on your personal 1040 return on Schedules C and SE. You can simply open additional personal accounts for the sole proprietorship without using an EIN.

    Finally, if you exceed the SS Maximum Taxable Earnings (2021 = $142,800) with W-2 wages, you generally do not want to create an S-Corp even if your net business profits are much larger. You will almost certainly pay greater FICA taxes that you would SE taxes as a sole proprietor.

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    • #3
      Originally posted by I-doc View Post
      I will be starting some work as a 1099 contractor this year. As a preface, I do not expect my income to be significant enough to form an S-corp as this will be a part time gig. From my understanding of what I have read, a sole proprietorship would be the easiest business setup without any increased liability (since there are no employees and I'll have malpractice insurance). If this does not sound reasonable - please let me know.
      I have called my state dept of revenue and from what I was told, I do not need to register for a business name or need a business license if I am using my name for the sole proprietorship since it is a service based business. I do want to set up a business bank account (to keep business expenses separate, pay taxes from, do solo401K contributions from, etc) for which I need an EIN. When applying for an EIN on the IRS website it asks for a physical address. Does anyone know if I would put the practice address where I will be working or my home address? I wasn't sure if this address was published publically as I really did not want my home address easily available for patients to look up.
      In terms of setup, do I really just have to setup an EIN through the IRS and then I start getting paid into my "business" checking account and do quarterly tax witholdings, etc. It seems like there should be more setup involved than just registering for an EIN and making a bank account (which I technically don't need, i think). I know this all seems really basic, but I just wanted to make sure I am doing this correctly as it seems too simple or like I am missing something. Thanks!
      You do not need an ein. My spouse uses our home address as our business address for all official purposes. Technically her practice address is not her business address as she doesn’t own that practice. I would use your home address

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      • #4
        Thanks for the helpful information. I really appreciate it. What you all are saying about the ein is consistent with what I’ve heard. It just seemed that it would be a little less headache and allow me to not have my ssn in as many places. There’s not any downside to getting an ein I guess right? Does anyone know if I do list our home address as the business address if that goes into any easily accessed public record that patients would be able to find easily?

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        • #5
          The privacy of income tax records are protected by law.

          You are required to file Form 5500 when your one-participant 401k is > $250k on 12/31 of any year. It used to be that if you filed Form 5500-SF because it could be filed online, it was searchable online. However starting with 2020, Form 5500-EZ can now be filed online and a one-participant 401k plan can no longer file Form 5500-EZ. Form 5500-EZ is still not searchable online.

          If you are not registering the business name with the state, there would be no state records.

          However, you should research to determine if a local business license is required. That would likely be public information.

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