Do You Need an EIN for an LLC: Everything You Need To Know
The answer to this question depends on many things, like the number of owners your LLC has, taxation treatment it elects, and the characteristics it possesses.4 min read
2. Single Member LLC
3. Single Member LLC With Employees
4. Taxation Election
6. Getting an EIN
Do you need an EIN for an LLC? The answer to this question depends upon various factors, like the number of owners your LLC has, taxation treatment it elects, and the characteristics it possesses.
Does an LLC Need an EIN?
An EIN or an Employer Identification number is a unique nine-digit number for business entities just like a Social Security number (SSN) for individuals. The Internal Revenue Service (IRS) assigns the EIN to a business entity.
Business entities must quote their EIN on their tax returns just like individuals mention their SSN. An EIN is like an account number on the basis of which the IRS identifies businesses for the purpose of taxation.
A Limited Liability Company (LLC) is a new type of business entity compared to corporations and other business structures. Since an LLC is a state entity, its formation and functioning may be different in different states.
Since the IRS does not classify LLCs as a separate taxable entity, you may have to get an EIN for your LLC in some cases. Whether you need an EIN for your LLC, or you can use something else for tax identification, depends upon various factors like how many owners it has and what characteristics it possesses.
Single Member LLC
The owners of an LLC are called members. You may or may not be required to have an EIN for a single member LLC.
If your LLC is engaged in a home-based business, and you look after the business on your own without hiring any employees, then you need not have an EIN. You can elect to be treated as a sole proprietorship for tax purposes, and use your SSN instead of the EIN for your LLC.
If you pay pension or excise tax, you must apply for an EIN.
Single Member LLC With Employees
If you want to hire employees, you must get an EIN for your single member LLC. Earlier on, a single member LLC could use its owner's SSN for payroll taxes. However since 2009, it must use an EIN for filing payroll tax returns.
- Since an LLC is not a separate taxation entity, a single member LLC has the choice to file its tax returns as a sole proprietorship, partnership firm, or a corporation.
- If you choose to file your tax returns as a partnership firm or a corporation, you will need to have an EIN.
- As a single member LLC owner, you must file Form 8832 if you choose to file your returns as a C corporation. However, if you elect to be treated as an S corporation, you must file Form 2553.
- If you file none of these forms (8832 or 2553), then the IRS will tax your LLC as a sole proprietorship.
If there is a change in the ownership structure, you may need to have a new EIN for your LLC. When an LLC is sold, the new owners must apply for a new EIN. For instance, if a single member LLC was filing its tax returns as a sole proprietorship and it later on elects to file as a corporation, then you need to get a new EIN.
An LLC must use an EIN for paying excise taxes to the Bureau of Alcohol, Tobacco, Firearms, and Explosives. You must have an EIN if your LLC participates in a Keogh retirement plan or withholds income tax on non-wage payments made to a nonresident alien.
Even if your single member LLC is not required to have an EIN, you may still want to get one so that you don't have to use your SSN while filing tax returns.
Getting an EIN
The most preferred way of getting an EIN is to apply online. Your information is validated and you get an EIN almost instantly. All business entities with their principal office located in the U.S., or having their legal residence in the U.S., can apply online.
Another method of getting an EIN immediately is through telephone. For applying through telephone, you can call 800-829-4933 any day except weekends and holidays. International applicants should call 267-941-1099.
You can also apply through fax or mail. For this, you need to prepare and send Form SS-4 to the IRS. You can download the form from the IRS website.
If you apply through fax and mention your fax number, you can expect to receive your EIN through a return fax within four days of applying. The time it takes to process a mailed application is often unpredictable.
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