LLC Federal Tax ID Number: Everything you Need to Know
“LLC Federal Tax ID number” refers to the federal tax ID number that is necessary for a limited liability company (LLC) to be recognized as a tax payer.3 min read
“LLC Federal Tax ID number” refers to the federal tax ID number that is necessary for a limited liability company (LLC) to be recognized as a tax payer. A federal tax ID number is obtained in the United States through the Internal Revenue Service.
What is a federal tax ID Number?
National governments usually have an arm that collects taxes from its citizens or subjects and its businesses. The Internal Revenue Service is the arm in the United States. An employer in the United States is required to have a federal tax ID number or a federal employer identification number (FEIN) which are two names for the same thing. Limited liability companies and other structures of business use the FEIN for tax purposes and filing their business tax returns. The FEIN has 9 digits. This number is used for both processing payroll and is required for many banking transactions.
What are the Steps to get a FEIN?
There are just a few steps to securing an FEIN for a business in the United States. There are requirements at both the State and Federal level. They are:
- Form a business properly at the state level
- Register the business in a state following the requirements in that state
- Apply for an FEIN from the Internal Revenue Service either online or over the phone
This number, once received, is then required for state tax registration, payroll processing, excise tax reporting and most banking transactions. This FEIN is used instead of an owner’s personal Social Security number. An employer in the United States is required to have a federal tax ID number.
How does an LLC use the FEIN?
Any time the LLC provides services of more than $600 per year to a business (or individual) the LLC uses the FEIN in order to issue a tax form 1099. In addition, the number is used exactly how an individual would use their own social security number (SSN). In fact, this FEIN is every bit as valuable as a social security number and needs the same high-level security that everyone affords their own SSN. Potential thieves of identity also try and steal FEINs.
How is an LLC taxed?
Limited liability companies are businesses that have a very specific tax identity. The Internal Revenue Service (IRS) allows LLCs to pass taxation to the owners but still be protected from debts and liabilities.
States each have regulations that govern aspects of the business. Aspects like member requirements, naming requirements and cost are all governed by these regulations.
A person who has control over assets or funds of the entity is considered to be a responsible party. Further, any individual who has control over the entity’s disposition of its assets and funds is considered to be a responsible party Limited liability companies sometimes have many owners, one of the owners is named the responsible party for securing a FEIN on behalf of the organization. There can only be one responsible party (no matter how many members in the LLC) for obtaining an FEIN.
Limited Liability Company (LLC) definition
A limited liability company is a business structure that is created at the state level. State statutes define how a business becomes an LLC. The Internal Revenue Service defines LLCs as either a taxable disregarded entity, a partnership or a corporation as not being different from owners for income tax purposes.
- Limited liability companies with multiple members can be either a corporation or a partnership
- Limited liability companies with a single member can be taxed either as a corporation or as a taxable disregarded entity
- Disregarded entities owned by one person is a sole proprietorship
- Corporations who own a disregarded entity it is a division or branch of that corporation
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