The Mistake of a Business Owner Regarding LLCs
Hypothetical 1: Sarah starts Paint by Sarah, LLC by filing the articles of organization with the Minnesota Secretary of State and obtaining the EIN herself. Because she is under the mistaken impression that her husband (who has nothing to with the business except to listen to his spouse vent) is automatically an owner of the business, she states the the LLC agrees to be taxed as a partnership. However, she never files partnership returns, which creates huge tax consequences and penalties to her. Moral of this hypothetical story: The application for an EIN looks deceptively simple, but it is often a...
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