When business-minded people get together, possible joint business projects are a popular topic of conversation. If you come from a family of entrepreneurs, then family holidays often include discussions of businesses your relatives are thinking of starting. It is part of the entrepreneurial mindset to look for commercially viable partnerships, especially with friends, colleagues, and relatives. These conversations run the gamut from drunken shooting the breeze to seriously thought out projects that actually come to fruition. If you are really serious about starting a partnership, go to the IRS EIN website and register for a partnership Tax ID number.
How Is a Partnership Different from Other Kinds of Businesses?
A partnership is a profit-seeking venture undertaken by two or more people or businesses. Thus, when two corporations undertake a project together, they can form a legal partnership. What separates a partnership from simply jointly owning something is that you seek to make a profit. For example, if your parents co-sign with you and your spouse for a home mortgage, it does not constitute a partnership.
Why Does a Partnership Need Its Own Tax ID Number?
The most immediate reason that a partnership needs its own employer identification number (EIN) is so that it can open its own bank account. Of course, a partnership also needs an EIN so that it can file a tax return. Therefore, you should register for an EIN for your partnership before you undertake any items of business. If you don’t, then you personally might have to pay taxes on the profits you earn from the partnership.
It is very easy to register for an EIN for your partnership. All you have to do is fill out an application on the IRS EIN website. Your partnership will have an EIN usually within an hour.