Key Takeaways

  • Small businesses can choose from several structures: sole proprietorship, partnership, corporation, S corporation, and LLC.
  • Each business type has different tax responsibilities, liability protections, and paperwork requirements.
  • An Employer Identification Number (EIN) is often required to pay taxes, hire employees, or open a business bank account.
  • Tax ID number lookup tools help verify a business’s EIN or Individual Taxpayer Identification Number (ITIN).
  • Sole proprietors can use their Social Security number for taxes, but many choose to apply for an EIN for separation and professionalism.
  • Corporations and LLCs must meet formal IRS and state requirements, including annual filings and EIN registration.

There are five types of corporations for small business to select from. They include sole proprietorship, partnership, LLC, C corporation, and S corporation.

Sole Proprietorship

Forming a sole proprietorship is considered the simplest business structure to create. Generally, it involves only one party who owns and operates the business. This structure is ideal for individuals who prefer to work alone. The key advantage to being taxed as a sole proprietorship is that net income from the business is taxed on the personal income tax return of the owner on Form 1040.

Losses and profits will be recorded on the Schedule C tax form, which is always filed with Form 1040. The net income of the business is taken from Schedule C and transported to the personal tax return of the owner. This aspect of a sole proprietorship is appealing to many owners because any losses incurred by the business can be offset against any other personal income.

Paying taxes correctly for a sole proprietorship will include filing Schedule SE on your Form 1040. The Schedule SE is used to calculate the self-employment tax due to the IRS. Unlike many other business structures, a sole proprietorship is only taxed once, on the personal income tax return of the owner.

Being at risk of unlimited liability is the most significant disadvantage of selecting to form a business as a sole proprietorship. In other words, an owner's personal assets may be liable for the liabilities of the business. As a consequence, the personal assets of the owner are at risk. They may be seized by a creditor to satisfy the legal claims or debts of the business.

It can be difficult for sole proprietorships to raise capital. Many banks are apprehensive to make a loan to a sole proprietorship. In other words, small business owners will need to rely on their own methods to finance the company, such as:

  • Family loans
  • Home equity loans
  • Savings

States do not currently require sole proprietorships to register with them. However, you still may need to request local business licenses or permits depending on the industry.

Tax ID Numbers for Sole Proprietors

Sole proprietors are not legally required to obtain an Employer Identification Number (EIN) unless they hire employees or plan to open a retirement plan. Instead, they can use their Social Security Number (SSN) for tax reporting. However, many sole proprietors apply for an EIN to avoid sharing their SSN on business documents and to build credibility with clients and vendors. If you lose your EIN, you can use the IRS’s resources or tax ID number lookup services to retrieve it.

Partnership

There are two types of partnerships:

  • General partnership
  • Limited partnership

A Partnership Agreement is an agreement between two or more individuals who would like to manage and operate a business together in order to make a profit. Partnership Agreements help to resolve and prevent disputes between owners.

EIN and Partnerships

Partnerships are required to obtain an EIN, even if they don’t have employees. This number is necessary to file the partnership’s annual information return (Form 1065) and to provide each partner with a Schedule K-1. Without an EIN, a partnership cannot file taxes properly or open a business bank account. In case the number is misplaced, partners can perform a tax ID number lookup through IRS records, past tax filings, or trusted third-party databases.

Corporation

Stockholders, officers, and the board of directors have total authority over the corporation. However, it is possible for an individual to fulfill all three roles. In other words, it's possible to start a corporation and be in complete charge of every aspect of the business. Corporations continue indefinitely and won't dissolve even when a stockholder:

  • Becomes disabled
  • Sells shares in the business
  • Dies

An experienced attorney can help guide you through the corporate law governed by each state. Remember, each state may have its own requirements and regulations. A significant disadvantage to forming a corporation is the number of formalities that need to be met, including:

  • Creating bylaws
  • Shareholder meetings
  • Board meetings
  • Acknowledging meeting minutes

Importance of EIN for Corporations

Corporations must have an EIN, as it functions like a Social Security number for the business. This identifier is used to file corporate tax returns, hire employees, and open credit accounts. Investors, lenders, and government agencies often verify corporations using EIN records. If you need to confirm or recover your corporation’s tax number, you can conduct a tax ID number lookup through the IRS, state registries, or financial statements where the EIN is often listed.

S corporation

S corporations pass the net income of the business onto the stockholders of the business in order for them to be taxed on their personal tax returns. Essentially, there's only one tier of federal income tax to pay.

Tax ID Lookup for S Corporations

S corporations use their EIN for all federal and state tax filings. Shareholders report business income on their personal returns, but the S corporation itself must still have an EIN to file informational returns and payroll taxes. If you cannot locate your S corporation’s EIN, you may contact the IRS, check previously filed returns, or use approved online EIN lookup tools.

Limited Liability Companies

An LLC is taxed in a similar fashion, except LLCs provide owners with even more benefits. For example, an LLC can have an unlimited number of stockholders.

Tax ID Numbers for LLCs

An LLC generally requires an EIN if it has more than one member, elects corporate tax treatment, or hires employees. Single-member LLCs may use the owner’s SSN but often choose an EIN to separate personal and business finances. When conducting a tax ID number lookup for an LLC, check prior IRS correspondence, bank account records, or the Secretary of State’s business entity search, which may list the EIN in public filings.

Advantages of an LLC

The simplicity of completing taxes is a key advantage for an LLC. The net income from the business is recorded on the personal income tax return of the member. Only in cases where the LLC has more than one member and decides to be taxed as a partnership will they need to file a separate business tax return on Form 1065. The other advantage for filing as an LLC is that the business will not incur double taxation. In a corporation, both the stockholders and the business are taxed.

Disadvantages of an LLC

When compared to a sole proprietorship, there is more paperwork required for an LLC. However, it is still far less when compared to a corporation. One-time filings include:

  • Tax status on Form 8832
  • Application for Employer ID on Form SS-4

Other reoccurring filings or paperwork that will need to be completed, include:

  • Quarterly reports
  • Annual reports
  • Opening a business bank account
  • Tax deposit coupons

How to Do a Tax ID Number Lookup

There are several methods for conducting a tax ID number lookup:

  • IRS Business & Specialty Tax Line – Call the IRS at 800-829-4933 to retrieve your EIN if you are an authorized party.
  • Tax Documents – Check previously filed federal or state tax returns where the EIN is listed.
  • Bank and Payroll Records – Business bank accounts and payroll providers often require an EIN.
  • Secretary of State Registries – Some states include EINs in public business filings.
  • Third-Party Services – Certain financial and compliance providers offer EIN verification databases.

Individuals who need an ITIN (Individual Taxpayer Identification Number) for tax filing but are not eligible for an SSN must apply directly through the IRS.

Frequently Asked Questions

  1. What is a tax ID number?
    A tax ID number can be an Employer Identification Number (EIN), Social Security Number (SSN), or Individual Taxpayer Identification Number (ITIN) used to file taxes.
  2. Do all small businesses need an EIN?
    Not all. Sole proprietors without employees may use an SSN, but most partnerships, corporations, and LLCs are required to obtain an EIN.
  3. How do I perform a tax ID number lookup?
    You can check past tax returns, bank records, or contact the IRS. Some states and third-party services also provide EIN lookup tools.
  4. What if I lose my EIN confirmation letter?
    You can request a copy from the IRS, or locate your EIN on previously filed tax forms, business licenses, or loan applications.
  5. Can I use my SSN instead of an EIN?
    Yes, sole proprietors may use their SSN, but applying for an EIN is safer to protect personal information and streamline business transactions.

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