Key Takeaways:

  • It's best to register your LLC before obtaining an EIN to ensure the EIN is correctly linked to your legal business entity.
  • An EIN is necessary for hiring employees, opening business bank accounts, and filing taxes.
  • The IRS requires an officially registered business before issuing an EIN under the new regulations.
  • Sole proprietors and single-member LLCs can use a Social Security Number but may prefer an EIN for privacy and professionalism.
  • An LLC provides liability protection, tax flexibility, and operational advantages over other business structures.
  • Certain business activities require an EIN, even if an LLC has not yet been formed.
  • Some banks and financial institutions may allow pre-LLC EINs, but this can lead to complications if the EIN is attached to an incorrect entity.

Should you register for EIN or LLC first when starting a business? An EIN and business registration are both important in setting up a business. However, it's important to know which should come first when planning to start an LLC.

Employer Identification Number

An Employer Identification Number (EIN), also known as a Tax Identification Number, is a unique number assigned by the IRS to a business entity for tax purposes and other financial transactions. It is used for filing tax returns, credit reporting, and serves as a form of identification for the entity during financial transactions. The following steps are required to obtain an EIN.

When Is an EIN Required?

An EIN is required in several business scenarios, including:

  • Hiring employees
  • Filing business taxes as an LLC, partnership, or corporation
  • Opening a business bank account
  • Applying for business credit
  • Establishing a business identity separate from personal finances
  • Registering for state tax obligations

Even if your business is a single-member LLC without employees, obtaining an EIN may still be beneficial. Many banks require an EIN for business accounts, and using an EIN instead of a Social Security Number (SSN) can protect your personal information from potential fraud.

Start a Business

Before applying for an EIN, an organization—whether established as a for-profit or nonprofit entity—must be legally registered as a business. Business owners are required to file business registration documentation which gives the business entity a legal status with the Secretary of State where the business is to operate. It's possible for any business to obtain an EIN, including businesses established with the owner's Social Security Number such as a sole proprietorship or S Corp. These businesses are eligible to obtain an EIN, but they are under no obligation to do so. However, business owners may opt for an EIN as it offers more privacy protection compared to a Social Security Number.

Contact the IRS

Once the business entity has been legally established and the appropriate documentation, such as partnership agreements or articles of incorporation, has been signed, the next step is to contact the IRS. A business owner can apply for an EIN via:

  • Fax
  • Phone at 800-829-4933
  • Online

You can also file in writing by completing the IRS Form SS-4, which should be submitted to the address specified in the instructions.

Common Mistakes When Applying for an EIN

To avoid delays or the need for reapplication, be mindful of these common errors:

  • Applying before LLC formation – This can cause your EIN to be assigned to a non-existent business, requiring an IRS update.
  • Providing incorrect business details – Ensure your LLC’s name and registration details match state records exactly.
  • Using a personal SSN when an EIN is required – Some entities require an EIN by law, and using an SSN incorrectly can create tax and legal complications.
  • Selecting the wrong entity type – Be sure you understand your business structure before submitting the SS-4 form.

If errors occur, you may need to cancel your EIN and apply for a new one, which can delay your business operations.

After Filing the SS-4

The method of submitting the Form SS-4 determines the processing speed. If you applied via phone, you would be assigned an EIN instantly. Fax applications get assigned an EIN within four working days. It can take up to five weeks for written applications sent by mail to obtain an EIN.

A business should not proceed with activities that require an EIN, such as opening a bank account, until the EIN has been obtained. It's not advisable to apply for such business processes with a personal Social Security Number as it may make you personally liable to the business's debts and obligations.

What If You Applied for an EIN Before Forming an LLC?

If you mistakenly applied for an EIN before registering your LLC, you have two options:

  1. Cancel the EIN and reapply – Contact the IRS to close the improperly assigned EIN and obtain a new one under the correct LLC.
  2. Update your IRS records – If the business structure remains the same, you may be able to update your business details with the IRS instead of canceling the EIN.

Keep in mind that if the name or structure of the LLC changes significantly, the IRS will generally require a new EIN

What Form of Entity to File

It can be hard to decide which form of business entity to file. All forms of business have their benefits and disadvantages, but your decision should be based on your interests as a business owner.

How Your Business Structure Affects EIN Requirements

The business structure you choose determines how and when you must obtain an EIN:

  • Sole Proprietorships – Can use an SSN but may opt for an EIN for privacy and banking needs.
  • Partnerships – Always require an EIN, as they must file business taxes separately.
  • LLCs – Single-member LLCs may use an SSN but often require an EIN for banking and tax purposes. Multi-member LLCs must obtain an EIN.
  • Corporations (C-Corps & S-Corps) – Must have an EIN for tax reporting and compliance.

Different structures come with varying tax implications and legal requirements, making EIN acquisition timing crucial.

Advantages of Forming a Limited Liability Company (LLC)

There are benefits of forming a Limited Liability Company (LLC).

Beneficial Effect

If you don't choose a specific type of business entity, you will be assigned one by the government. It's important to research the different forms of business entities to know which best protects your interests.

Protection from Liability

An LLC or corporation might be the best for some business owners as it protects them from liability to the business's obligations.

Enhanced Professionalism

LLCs and corporations have a more professional outlook because they are allowed to add an “LLC” or “Inc.” to their names.

Taxes

An LLC has an advantage over a corporation regarding taxation. A corporation faces double taxation as the company pays taxes on its earnings and its shareholders also pay taxes on their share of the company's profits. An S-Corporation enjoys a pass-through tax status which exempts it from paying corporate tax, but getting classified as an S Corp is difficult. However, an LLC is allowed to choose a C Corp or S Corp designation regarding its taxation.

Ownership

An LLC is owned by members while a corporation is owned by shareholders. The amount of money members of an LLC can withdraw from the company is not dependent on their investment, whereas shareholders of a corporation can only receive dividends based on their ownership interest.

Operation

LLCs have a more flexible administrative process, while corporations require a board of directors and management team working for the shareholders.

Why You Should File for LLC Before EIN

It's necessary to file for LLC before EIN as you are not guaranteed your business name if it has not been registered. Also, the new regulation of the IRS requires filing the articles of incorporation and other documentation before businesses can obtain an EIN.

What Happens If You Get an EIN Before Your LLC?

Applying for an EIN before forming an LLC can lead to:

  • IRS Record Mismatches – If your LLC’s registered name differs from what was used for the EIN, corrections must be made.
  • Banking Issues – Many banks require proof of LLC registration before linking an EIN to a business account.
  • Legal Complications – If your EIN is attached to an incorrect or non-existent entity, it may cause compliance issues with the IRS.

To avoid these risks, complete your LLC registration first before applying for an EIN.

Frequently Asked Questions

  1. Can I apply for an EIN before forming an LLC?
    Technically, yes, but it is not recommended. If you apply too early, the EIN may not match your finalized business entity, causing IRS and banking complications.
  2. What if I already got an EIN before registering my LLC?
    You may need to cancel the EIN and apply for a new one under the correct business structure.
  3. Do I need an EIN if I’m a single-member LLC?
    Not necessarily, but an EIN can help with banking, privacy, and tax benefits.
  4. How long does it take to get an EIN?
    • Online: Immediately
    • Fax: 4 business days
    • Mail: Up to 5 weeks
  5. What happens if I use my Social Security Number instead of an EIN?
    You may be personally liable for business debts, have fewer banking options, and risk exposing your personal information to fraud.

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