1. Does Single-Member LLC Need EIN
2. IRS Business Classification
3. How to Obtain an EIN
4. Other Considerations for Obtaining an EIN
5. Sole Proprietorship Tax Treatment
6. Corporate Tax Treatment

Does Single-Member LLC Need EIN

Does a single-member LLC need an EIN? The short answer here is maybe. An EIN, also referred to as an employer identification number, is a 9-digit business ID number, similar to a social security number for individuals. You obtain this number from the Internal Revenue Service (IRS) for the purpose of filing taxes for your LLC. 

It is not an absolute requirement to obtain an EIN for your single-member LLC. Since the IRS doesn’t recognize LLCs, LLCs can elect to be taxed as a sole proprietorship (disregarded entity), partnership, or corporation. So, depending on which type of business structure you elect to be taxed as, you might need an EIN.

IRS Business Classification

As previously noted, LLCs can elect to be taxed as a sole proprietorship, partnership, or corporation. This will depend on if you operate as a single-member or multi-member LLC. If you form a single-member LLC, you can choose to be taxed as a sole proprietorship or a corporation. The sole proprietorship is also referred to as a disregarded entity. If you choose to be taxed as a corporation, you will need to determine if you want to be taxed as an S corp or C corp. However, multi-member LLCs can only choose to be taxed as either a partnership or corporation. 

How to Obtain an EIN

There are four ways in which you can obtain an EIN:

• You can apply online, which is the easiest and quickest way to obtain an EIN

• You can fax in your EIN request

• You can mail your EIN request

• You can request an EIN over the phone; you can obtain your EIN immediately using this method

If you choose to mail or fax your request, you will need to fill out Form SS-4, which you can find on the IRS website. If you fax your request, you can expect a response within four business days. If you mail in your request, it could take longer, depending on many factors, i.e. how many other requests are currently being reviewed, etc.

Other Considerations for Obtaining an EIN

Aside from tax purposes, there are other instances in which you might need to have an EIN. For example, a lot of financial institutions will not allow you to open a business bank account without an EIN. Furthermore, other companies that you might want to do business with could require you have an EIN.

Some states even require that all LLCs use an EIN to report income at the state level. If you want to know how your LLC will be taxed, then you will need an EIN, i.e. currently being taxed as a sole proprietorship but now wanting to be taxed as a corporation. If you want to sell your LLC, the new owner(s) will need to obtain an EIN.

Sole Proprietorship Tax Treatment

If a single-member LLC owner fails to make an election for tax purposes, then the IRS automatically treats that single-member LLC as a sole proprietorship. Therefore, you will not need a separate EIN number for tax purposes. Keep in mind that if you hire employees, you will need an EIN regardless because you will need this number for payroll taxes. However, if you are a single-member LLC with no employees, you will report the LLC profits/losses on your own personal tax return using your social security number.

Corporate Tax Treatment

Corporations are considered separate legal entities from the owners for tax purposes. For this reason, the IRS needs to keep track of the corporation and the various filings for that business. In order to do this, the IRS will easily be able to identify all documentation via the EIN for that business. Therefore, if you operate an LLC that is taxed as a corporation, you will need an EIN.

If you need help forming a single-member LLC, or if you need assistance converting your LLC tax structure, 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.