Small business expenses while working full time

Before deciding on the form of a business, particularly at your income level, you should consult a tax professional, either CPA or EA, to help determine the form of business that would be best for you in your specific circumstances.

In the start-up phase, some expenses may be able to be deducted, but most must be capitalized. Talk to a tax professional about your best strategy on this score.

You don't have to, but it is recommended, so that you don't have your own personal social security number out among more people than you need to.

To get your own tax ID number, go to the IRS website:

As a proprietorship you can't deduct charitable contributions. For other things you can only deduct legitimate and reasonable expenses.

You really need to talk to a tax professional. Trying to save a few dollars by doing it yourself could very well end up being a whole lot more expensive.

Generally yes, although be careful with what you deduct. I'm not sure what you mean by "contract software salary". You can't pay a salary to yourself out of a sole proprietorship. Talk to a tax professional on this.

If anybody issues a check made out to the name of the business and not you personally, you will need a separate Federal EIN for the business. You can't cash a check that is made out "Acme Computers" by depositing it to your personal account, for example. You need to get a EIN for "Acme Computers" (the name of your business) and open up a separate bank account for the business.

Some startup expenses need to be capitalized. See Internal Revenue Bulletin: 2008-34,

While it is definitely a good idea to get a separate tax ID number, mostly to avoid identity theft, there is no legal requirement to do so.

If a person starts a proprietorship under a name other than his own, all he needs to open a bank account in the name of the business is a filed fictitious name statement. His regular social security number can be used in that case.

Generally yes, although be careful with what you deduct. I'm not sure what you mean by "contract software salary". You can't pay a salary to yourself out of a sole proprietorship. Talk to a tax professional on this.

If anybody issues a check made out to the name of the business and not you personally, you will need a separate Federal EIN for the business. You can't cash a check that is made out "Acme Computers" by depositing it to your personal account, for example. You need to get a EIN for "Acme Computers" (the name of your business) and open up a separate bank account for the business. ==========#2: I disagree. An EIN is needed for a sole proprietorship ONLY if you have employees, and thus file payroll taxes. That's why it's called an EMPLOYER identification number. One does NOT need an EIN to open a business bank account. A DBA registered with and published in the county is sufficient.

Agreed, but right or wrong, I've known banks to adamantly refuse to open a sole prop account without an EIN.

Since you can get an EIN in about five minutes on the IRS web site at no charge, it's not worth a lot of argument.

Since there is more than one bank, credit union, etc. it is not worth a lot of argument.

In those cases you can write out your social security number in the spaces for an EIN. The bank shouldn't have any problem with that.

But again, for purposes of personal security and to avoid identity theft, it's a good idea to use an EIN when possible rather than your personal social security number.

I don't understand this. There is more than one bank so they will all ask for different EIN's? You can use the same one, or your SS#, at every bank.

Or as you saying that lots of banks will ask for an EIN so you should get one to avoid multiple problems? Again, if they do, simply use your SS# in the space provided for an EIN. It shouldn't be hard.

If a bank insists, as the previous poster stated, that an account be opened with an EIN OTHER THAN your SSN, walk out the door and find the next bank down the street.

I have not seen that problem, but given all the other problems I have seen in financial institutions I don't doubt that poster for a minute.

I suppose the alternative would be to walk out that door and walk back into the same bank branch at a different time and get a different/more knowledgeable/less attentive teller.

That's not the only reason. A sole prop also needs an EIN to establish a qualified retirement plan, such as a solo 401(k).

There are 3 other times (not IRS driven) as well:

1. File for bankruptcy.
2. You gain ownership of another business that you operate as a sole proprietorship.
3. You want to change your business entity to either a corporation, partnership or LLC.

There is a 4th but it is not by law. There are still some financial institutions that will not open a business account without an EIN.

Though it's generally pretty useless for a corporation to file bankruptcy (unless it's a chapter 11 or 13 where there is a decent chance of staying in business), because debts of corporations don't get discharged.

And then there's my issue - to help avoid potential problems with identity theft, using an EIN is better than using your own SS#.