Do I Need an EIN for an LLC: Everything You Need to Know
Not sure if your company needs one? If you're looking for more details about EIN's for Limited Liability Companies, read on to learn more about various situations where you do and don't need an EIN for an LLC.3 min read
Do I need an EIN for an LLC? The answer may be yes.
An Employee Identification Number (EIN) is nine digits long, like a Social Security number. The IRS assigns EIN's to business entities that need to submit tax returns and helps them track the corporations business activity.
Not sure if your company needs one? If you're looking for more details about EIN's for Limited Liability Companies, read on to learn more about various situations where you do and don't need an EIN for an LLC.
Pros of Obtaining an EIN for an LLC
Thieves are getting creative with their ability to steal your identity using your social security number. If you're worried about this, an EIN is a good solution.
Once you've got an EIN set up, you can (legally) hire employees and create a payroll system. In addition, you can apply for secured loans, unsecured lines of credit, and any business licenses or local permits as necessary.
If you plan on setting up multiple businesses that are closely related, you can have individual names for each one, yet keep them under one LLC with one EIN.
Information About Getting an EIN for Your LLC
An EIN helps identify people on tax forms, much like a social security number, and can be used instead of a social security number in most situations. An EIN isn't necessary for all businesses, but if you are starting to hire people, it might be a good idea as the EIN determines how your company is treated in any lawsuits. Here are some instances when an EIN may, or may not be needed:
- If you're a business partnership or sole proprietorship has an EIN already, you can keep the existing EIN when you change your business structure to an LLC. Likewise, if you were a sole proprietor with an EIN and are switching to an LLC for tax purposes only, you won't need to use it.
- A new EIN isn't required for minor business changes like the business name or office locations. But if you're changing the way your LLC is structured, you may need a new EIN. An example is a single-member LLC formerly taxed as a sole proprietor. A new EIN needs to be filed if you want to begin being taxed as an LLC.
- If you sell your LLC, a new EIN needs to be applied for by the new owners.
- If you're a business that is working with other companies, they may need you provide an EIN for payment processing purposes.
- There are certain situations that require businesses running as a partnership or sole proprietorship to apply for an EIN. If you file business taxes for employment, excise, alcohol, tobacco, or firearms, you need an LLC.
- In regards to employment taxes, if you pay contractors $600 or more, you'll need an EIN for the 1099-MISC. You'll need an EIN if you need to file for state corporate or franchise taxes.
- If you pay taxes as a sole proprietor, your LLC is a "disregarded entity," and an EIN might not be required.
- Regardless of your LLC situation, if you choose to treat an LLC as an S or C- Corporation, you'll need to get an EIN.
- A new EIN is required if you have an existing partnership LLC (with EIN), but decide to create a new partnership.
Steps for Creating an LLC
You can apply for an EIN in various ways:
- On the internet
- By telephone
- Via fax
- By mail
Applying online is the most efficient way for your LLC to obtain an EIN. Your business information is validated in real time, and an EIN is issued immediately.
If you're applying via fax or mail, you need to download the SS-4 form from the IRS website to complete. If you let the IRS know your fax number, you'll receive a response within four days. Mailed responses take longer and are difficult to predict due to transit time.
You can apply via telephone and provide the details over the phone. The processes for this change regularly, so the times for you to receive your EIN can differ.
If you need help with deciding whether you need an EIN for your LLC, you can post your legalneedon 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.