What are differences between Single-Member LLC and Sole Proprietorship? Also can you easily change this? Suppose that you obtained EIN as you informed IRS that your company is a Sole Proprietorship. Can you easily change that to Single-Member LLC?

A single-member LLC (taxed as a sole proprietorship) compared to a sole proprietorship have no tax differences. The LLC will have legal protection, so in the event your sued, only the assets of the LLC can be taken and not your personal assets. Hypothetically this is how it goes, but then again a lot of people are sue-happy and tend to sue any and every thing which is involved.

If you wish to create a single member LLC and don't have one, you will have the option of having it taxed as a corporate entity. You'll than file 1120 at the end of the year.

In regards to the entity change, I'm not sure. There is a document which outlines this but I do not believe you'd need a new EIN if it's a single member LLC and you were a sole-proprietor before (and will still be filing Schedule C). If you add a member to the LLC, than forget it, because the "entity" changes.

Here is the chart: http://www.irs.gov/businesses/small/...=98011,00.html

Change from a S-P to a one-member LLC, taxed as sole proprietorship = Fine
Change from a S-P to a one-member LLC, taxed as a corporation = New EIN
Change from a S-P to a two or more member LLC = New EIN

Probably this is a trivial question to you (and others who've been running business), but allow me to ask this question. I just started learning all these things ...

Suppose that the company will make its first income a month from now; the company deposits a check, receives a payment via EFT, etc.

Q1. If I want the company to be taxed as a sole proprietorship, do I need to file tax for it this April?

q1.2. ... or at the end of the year?

Q2. If I want the company to be taxed as a corporate entity, do I need to file tax for it this April?

Q2.2. ... or at the end of the year?

A tax return filed in April of this year is for 2005. You'd be filing a tax return in April 2007 for income made during January 1, 2006 to December 31, 2006 (which is the accounting period used by most businesses).

This applies to both questions. If I write you a check for $500 for various services, you'll be claiming it as income next year, whether you file 1040 Schedule C (S-P) or 1120 (corporation).

As I look at this ( http://www.irs.gov/businesses/small/...=98011,00.html ), it seems that the same company may change its EIN a couple of times. How does the bank look at all these different EIN? How does the ... credit score (?) apply to all these different EIN? What I'm asking is this. Individual has only one Tax ID, and that's it; it makes sense for the individual to have credit score and what have you. But the company may change its EIN; how does the company's financial status get tracked?

You can apply for a DUNS number from Dun and Bradstreet. They are a business credit reporting agency and many business creditors pull D&B reports to review when considering an application for credit. When you apply for the DUNS number you will supply basic information about your company including its EIN.

If the EIN ever changes, you can simply update the information on your D&B report to reflect the new EIN. Since it will all be under the same DUNS number, the company's credit history will continue to be tracked. (It might not hurt to also notify existing creditors when your EIN changes, esp. those that report your payment information to D&B.) All kinds of company information can change from time to time--EIN, the company name, address, phone number--but this can be updated with D&B.