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11 Replies Last post: Nov 18, 2008 10:29 AM by Santa Fe CPA

Does a Corp. (CA) need additional EIN# for ea business?

Nov 15, 2008 7:30 PM

DynoMan 7 posts since
Oct 1, 2008

Okay, I cannot think straight today. Help!

I have an S-Corp (CA) with an EIN. We are buying an existing business in the same state. Do I need a separate EIN for the new business or does the corporate number suffice for all businesses we may start up/purchase? We will keep completely separate business accounts, payroll, utilities, accounting, etc from the parent corporation.

For example: if I wanted to open a checking account for the new business, could I open it with my corporate EIN (with proof of fictitious name statement and bus. lic.), even though the EIN was issued to a different name than that of the business name? Am I making this more complicated than it really is?

My sanity thanks ahead of time!

Tags: business_start_up, new_business, corporation, corporate_acquisition, ein Report as inappropriate

intechspecial 1,455 posts since
Jan 6, 2008

1. Re: Does a Corp. (CA) need additional EIN# for ea business? Nov 15, 2008 7:39 PM

That is a good question, and I would like to hear the answer to this.

Thanks for the post!

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Santa Fe CPA 67 posts since
Oct 10, 2007

2. Re: Does a Corp. (CA) need additional EIN# for ea business? Nov 16, 2008 1:02 PM

DynoMan:

The critcal issue will be how do you intend to operate the acquired business entity? As a continuing busines by itself or will you combine or consolidate the 2 entities. Need to know this before a substantive answer can be given.

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Lighthouse24 2,396 posts since
Oct 10, 2007

3. Re: Does a Corp. (CA) need additional EIN# for ea business? Nov 16, 2008 1:52 PM

As SantaFeCPA suggests, corporate divisions can share an EIN, but a corporate subsidiary needs its own. What you described sounds as though you intend to operate the newly acquired firm as a subsidiary -- and if you are maintaining separate payroll accounts, it would seem to make sense to have separate EINs to facilitate that, too. (It would also make sense if your plans for growing and developing that business could follow a different course than the original company.)

All that said, SantaFe is clearly the expert on the subject -- so if you outline the specifics of you situation, I'm sure you'll get a spot-on answer.

Best wishes with the new acquisition!

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intechspecial 1,455 posts since
Jan 6, 2008

4. Re: Does a Corp. (CA) need additional EIN# for ea business? Nov 16, 2008 3:13 PM

Another suggestion is to go to the IRS.gov website for more information.

The IRS also has a toll-free, no charge help line available to answer all of your questions.

I have found the IRS help line to be an educational asset all in its own in regards to business.

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DynoMan 7 posts since
Oct 1, 2008

5. Re: Does a Corp. (CA) need additional EIN# for ea business? Nov 16, 2008 3:46 PM

in response to: intechspecial

Santa Fe CPA, Lighthouse24 and Intechspecial, you are all so wonderful for chiming in! Thanks a bunch!

Maybe a little more specifics will help, and I do agree, the IRS has been helpful every time I've called them. I just didn't want to wait until Monday.

Here's the bottom line: We are in escrow to purchase a small, existing business that has been successfully operating for 9 years. We will hire 1, maybe 2, employees to run it. We will both be keeping our present jobs and running this for a moderate investment return. My husband and I have formed a corporation for the corporate veil protection. We have an EIN in the corporation's name. However, we will assume the existing business name and handle all accounts (as I have mentioned in previous post) with the business name.

So, I guess subsidiary is the right answer here. Just figuring out how to apply for the EIN is the new question. Am I getting one for a corporation or a partnership or what? Subsidiary is not an option to check and it's not a new corporation. We won't have much accounting with the parent corp, except at the end of the year with profit/loss passed from the new business. I can wait till Monday to check with the IRS and I will post back what they tell me. Escrow closes less than 60 days, and I'm just wanting all the details lined up and ready to go. It was so simple in my head a week ago until I went to the IRS site... Maybe a human is the best way to go first. I'll keep you updated!

Thanks.

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Lighthouse24 2,396 posts since
Oct 10, 2007

6. Re: Does a Corp. (CA) need additional EIN# for ea business? Nov 16, 2008 4:06 PM

in response to: DynoMan

I wonder if you are not just buying the ASSETS of an existing business, as opposed to buying the legal entity itself -- in which case, those assets become the assets of the company that bought them (presumably, the one you've already formed). So there'd only be one company and one EIN involved -- unless you created a subsidiary by forming another company. (SantaFe, correct me if I'm wrong there.)

On the other hand, if you are buying the company itself (all of its assets, stock, debt, everything), then the best way to structure that acquisition goes back to the questions regarding how you intend to integrate, operate, and develop the firm.

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Santa Fe CPA 67 posts since
Oct 10, 2007

7. Re: Does a Corp. (CA) need additional EIN# for ea business? Nov 16, 2008 4:36 PM

in response to: DynoMan

DynoMan.

This update from you is helpful. There are a couple more questions. 1. What is the entity form of the existing business? Are you buying the assets or the equity of the current owners?

It sounds as though your new coorporation is going to be the owner of the entity you are buying. Have you made the S-Corporation Election for it, in order to pass through the earnings/losses to your personal returns?

If the purchased entity is the employer of record, it will need its own separate EIN for employment taxes, along with the regular registrations with the CA Sec of State and FTB in Sacramento. You will also have unemployment tax records to transfer from the old to the new to have some control over the SUTA (State Unemployment tax) rate.

It appears to me that you are un-necessarily complicating the issue with 2 entities in the heirarchy of rather small enterprises.

My recommendation is for the New Corp to acquire the assets of the old entity including the name rights.
The New Corp, as an S-Corp, then becomes the operating entity with a complete new legal identity using the old Corp name as a DBA registration (Doing Business As.) Don't forget to have a non-compete clause in the purchase contract

Discuss these comments with your lawyer and accountant. If you don't have both get them they will save you money over and above what the fees are in the long run and get you off on the right foot.

All the forms that you need are on the web in an interactive format. (www.irs.gov/businesses/small) I don't know the addresses are for CA.

If you would like to discuss this more next week, you can reach me through my SBOC profile information.

Regards,
Richard g. Robinson, CPA
Santa Fe CPA

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DynoMan 7 posts since
Oct 1, 2008

8. Re: Does a Corp. (CA) need additional EIN# for ea business? Nov 16, 2008 7:05 PM

in response to: Santa Fe CPA

Richard-

You have been great!

Lot's of good info here. Let's see. I'm not positive of how to answer "what is the entity". We are buying a service oriented business with all equipment as assets. There really isn't much product stock. You come in, you get your car smog tested and you pay the bill. Very simple. The current owner/operator is legally a corporation and he is selling this business in total. Meaning, everything within the walls (equipment, machines, smog test machine and BAR approved dynamometer, a small stock of inventory - not much is needed to run this, business name and covenant not to compete.). We have met with his landlord and he is reassigning the remainder of the lease to us, releasing the current owner. The release of his corporation will be included in escrow.

Our new corp is indeed S-Corp status and we have a corporate checking account to show our personal investment money going in and the corp will buy the new biz. I want to keep this as straight forward as possible, which will pay off on the other end of repayment to ourselves (I'm thinking) and further investing opportunities.

I have obtained a business lic & a seller's permit in the name of the biz (our Corp dba the biz). We have published a FBN as the Corporation dba the biz name. It is my goal to open a checking account in the name of the biz and all monies: income (processing & deposits) and expenses (bills, payroll, etc), go through it. Granted, it complicates things a little financially, but if we go forward with a different or another investment under the Corporate umbrella, it should keep each one clean.

This is why I think that a separate EIN would be wise. What if, in the future, we open a donut stand in front of a gym, say? Would we use the Corporation's EIN for the auto related biz's payroll and accounts as well as for the food industry's? This may do well for establishing a credit history for the Corp, but in my head, it's getting sloppy for the neat and tidy boxes that I want to put everything in. And maybe that's the crux of the whole thing. i want to keep it all contained within each entity, and protected by Grandpa Corporation who just sits there and protects us personally. Hmmm...

I will let you know what the IRS has to say. Thanks!

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DynoMan 7 posts since
Oct 1, 2008

9. Re: Does a Corp. (CA) need additional EIN# for ea business? Nov 17, 2008 9:40 PM

in response to: Santa Fe CPA

Hi Richard, et al-

So, here's an update. Called the IRS. I explained the situation and the agent on the other end would put me on hold to research it, come back on the line, get more info, research, etc... I got as much info from them as I did the website. Hung up just as confused. **Please note, she was as helpful as possible, and willing to try to find an answer so this is not a gripe against her or the IRS.**

Went to Wikipedia, of all places, to get the BUS 101 on Corporate structure. Subsidiary vs. Division, Parent company, blah blah blah.

Called my husband's accountant friend. He had good answers and explained it very well almost piggy backing on what Richard pointed out.

My conclusion: they all point back to what Richard said in the post above. I would be complicating the matter with the 2nd EIN, ESPECIALLY considering the size of our meager Corp and business venture. It will be possible to open accounts, handle payroll, etc as "the Corp. DBA the Biz name." As long as my Corp name shows up in a prominent part of the account name, the IRS should be fine using the single number. How we keep the accounting segregated is our issue, but that seems to be the easiest part for me as I like the neat and tidy box approach to each biz. In the end, the divisions of the Corp report at the end of the year to the main Corp all info, and that is what passes through to our personal taxes. (Very basic explanation, I know.)

If we continue to invest in the same industry, we can handle it through the one EIN. If we change industries, from say auto to food, we will have to address that when it happens But for now, I'm going with one number and grateful for the time you have all spent in my education of business and it's structure!

Many thanks!

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Lighthouse24 2,396 posts since
Oct 10, 2007

10. Re: Does a Corp. (CA) need additional EIN# for ea business? Nov 18, 2008 12:18 AM

in response to: DynoMan

I'm glad to hear you got an answer and are on track. Thanks for following-up and posting what you learned (not nearly enough people do that here). Others can now benefit from your experience.

Again, all the best to you on your new business acquisition!

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Santa Fe CPA 67 posts since
Oct 10, 2007

11. Re: Does a Corp. (CA) need additional EIN# for ea business? Nov 18, 2008 10:29 AM

in response to: DynoMan

My thanks also, for your posting your reponses to the IRS, other comentators and us. Good research saves a lot of problems.
For the time being, the accounting software you use, I recommend QuickBooks, properly set up will keep your various activities separated and combined when necessary.
Good luck in this and future endeavors,
Richard

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