1. What's an LLC?
2. When Do You Need an EIN?
3. Choosing How to Register
4. Changing a Sole Proprietorship
5. Changing an LLC
6. Applying for a Business License
7. Changing Your Business
8. EIN Benefits

Can I get an EIN without a business? An EIN, or Employer Identification Number, is a type of Tax ID number used by the IRS. It identifies your business for tax purposes. You do not need an EIN if you don't have a business, because your social security number will be your Tax ID number.

What's an LLC?

LLC means "limited liability company." LLCs are state entities, and rules regarding them can be different in each state. However, LLC owners must still pay federal taxes. LLC owners may need an EIN, or Employer Identification Number — sometimes referred to as a Tax ID (TIN).

When Do You Need an EIN?

Single-member LLCs (or sole proprietorships) may not need an EIN. If you are the owner, manager, and director of your home-based business, you do not need an EIN. Instead, you can use your social security number (SSN). However, once you decide to hire employees, you must have an EIN.

LLCs can choose how they want to be taxed from these options:

  • As a corporation
  • As a partnership
  • As a sole proprietorship (if there is only one member)

LLCs choosing to be taxed as a corporation or partnership need an EIN.

Choosing How to Register

Registering as a sole proprietor is good if you are a single owner who operates the business alone. There are no employees, and the owner is responsible for all payment, debts, and receives all business profits.

If you are a single owner or a group who wants the protections of a larger company, an LLC is for you. An LLC is technically a business, but it is considered incorporated and has more flexibility.

It's important to talk to your accountant when deciding how to register.

Changing a Sole Proprietorship

A sole proprietor may register for an EIN or simply use their SSN. However, if the following changes occur, a sole proprietorship will need an EIN:

  • You hire employees.
  • You set up a Keogh or Solo 401(k) retirement plan.
  • You buy or inherit an existing business
  • You incorporate or form an LLC.
  • You file for bankruptcy.

Changing an LLC

You may also need a new EIN if any changes to ownership occur:

  • Your business is bought.
  • Your business changes from a sole proprietorship to a corporation or partnership.
  • The owner of a business dies.

There are four ways to get an EIN for your LLC:

  • Apply online — the most efficient way, will enable you to receive your EIN immediately.
  • Telephone — will also enable you to receive your EIN immediately.
  • Fax — requires you to complete form SS-4, from the IRS website.
  • Mail — requires you to complete form SS-4, from the IRS website.

If you do not have an SSN, you need to apply for an individual taxpayer identification number (ITIN). To receive this, you must file Form W-7: IRS Application for Individual Taxpayer Identification Number.

Applying for a Business License

A business license and an EIN are both important when starting a new company. In many states, you can get either one first — or both at the same time. Some states require a Tax ID or EIN before getting a license.

Business licenses come from cities and counties, and each can establish its own requirements. Some municipalities don't even ask for an EIN in their license application.

States that don't require a TIN in their license application do require a Social Security Number. Some states, like Washington, prefer to track the individuals, not businesses, to ensure responsibility. Some places require the TIN or EIN as part of the application process. They keep license information on the websites of their finance departments.

Changing Your Business

If you apply for a business license with your SSN and decided to change your business to an LLC with an EIN, you need to let your state tax authority and local licensing body know. State and federal governments require payroll deductions and need the EIN for labor and wage compliance procedures.

EIN Benefits

Even if you don't need an EIN, there are some benefits to having one:

  • It identifies your business within the IRS.
  • An EIN is obligatory if you want to open a business bank account.
  • An EIN can help you avoid identity theft.
  • An EIN can establish independent contractor status.

Unless you are a sole proprietorship or an LLC with no employees, you will probably need an EIN for your small business. The best way to learn about EINs and other aspects of business tax law is to speak with a skilled tax attorney near you.

If you need help with getting an EIN and starting your business, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.”