Do LLCs Need an EIN: Everything You Need to Know
An LLC, or limited liability company, is governed by state law and is not recognized as a separate entity by the Internal Revenue Service (IRS).3 min read
2. Requirements for EIN
3. Single-Member LLC
4. Benefits of an EIN
5. How to Apply for an EIN
6. Multiple Businesses
7. Changes Within the Business
"Do LLCs need EINs?" is a common question for new business owners. While some businesses use EINs, or employer identification numbers, for taxation purposes, others can file taxes using the individual owner's Social Security number.
LLCs and the IRS
An LLC, or limited liability company, is governed by state law and is not recognized as a separate entity by the Internal Revenue Service (IRS). However, the LLC is still taxable and must file a federal tax return using an EIN if it elects for taxation status as a corporation or partnership. This is true even for an LLC with only one owner. However, you can also opt to pay taxes as a sole proprietorship, also called a disregarded entity. In this case, you can file taxes for your LLC using either your Social Security number or Taxpayer Identification Number.
Requirements for EIN
All LLCs that have employees, including single-member LLCs, must obtain EINs from the IRS. An EIN is also required if the LLC is subject to alcohol, tobacco, and firearm or excise taxes.
Before 2009, a single-member LLC with employees could use his Social Security number for payroll tax purposes; now, however, an EIN is required. If you own an LLC and work as an independent contractor, you may receive a Form W-9 requesting your tax identification information. This is used to prepare Form 1099-MISC for reporting income tax. The IRS requires that the owner's Social Security number be used to fill out this form, even if the LLC has an EIN. However, the EIN is used to report employment taxes, including withheld federal income tax, FICA tax both payable and withheld, and federal unemployment tax. Excise tax is also reported under the EIN.
Benefits of an EIN
The EIN is a unique nine-digit number used as a tax ID for a business. In some cases, a business owner may need more than one EIN. This is most common for those who own multiple businesses and legal entities like trusts and estates. Using an EIN for your business taxes can help protect you from identity theft since you don't need to use your Social Security number on official LLC forms. With an EIN, you are legally allowed to hire employees, establish payroll, open bank accounts, apply for loans and lines of credit, and apply for local business licenses and permits.
How to Apply for an EIN
Apply for your business EIN using one of the following methods:
- Apply online to receive your EIN immediately.
- Apply via telephone to receive your EIN right away.
- Apply via mail or fax by printing and completing Form SS-4. You'll receive a return fax with your EIN within four business days or a response via postal mail within a few weeks.
The EIN is specific to your LLC, but you can often run multiple businesses within the same LLC without additional EINs. However, a separate legal entity must have its own EIN since it can accrue and pay its own debts. For example, a division of an existing LLC would not need a new EIN, but a completely separate company would.
An individual can own and operate any number of separate businesses and apply for unlimited EINs. Businesses under the same LLC can use the designation DBA (doing business as) to operate under different names. This does not change the official legal name of the company. However, all DBAs must be registered with the state.
Changes Within the Business
If you change your sole proprietorship or partnership to an LLC, you can keep your existing EIN or keep using your Social Security number, as applicable. A new business name or location does not require a new EIN. If you sell your company, however, a new EIN must be requested by the new owner.
If you need help with establishing an EIN for your LLC, 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.