LLC ID Number: Everything You Need to Know
An LLC ID number is a tax ID number that is usually required for all LLCs. An LLC is a unique business structure that operates as a pass-through tax entity.3 min read
An LLC ID number is a tax ID number that is usually required for all LLCs. An LLC, also referred to as a Limited Liability Company, is a unique business structure that operates as a pass-through tax entity in that the taxes to be paid by the LLC are instead passed on to the owners who report it on their personal tax returns. Another major benefit of the LLC is that it offers limited liability protection for its owners, similar to that of a corporation. LLCs can be owned by people, corporations, other LLCs, partnerships, or any other type of business structure.
When you choose to form an LLC, you will need to ensure that you abide by the requirements set forth by the state in which you are forming. There can be requirements at the federal, state, and local levels. One of these potential requirements is obtaining a tax ID number, which is also referred to as an Employer Identification Number (EIN).
The tax ID number is used to identify the LLC, similar to that of a social security number for an individual. The EIN number is nine digits long. Any LLC that hires employees is required to obtain an EIN. Furthermore, if you operate a multi-member LLC (more than one owner), then you will be required to obtain this ID number. However, if you are operating as a single-member LLC with no employees, then you might not need to obtain an EIN. In this case, the sole owner can use his or her personal social security number.
If you are required to obtain an EIN, you won’t need a new tax ID number if you ever change your name or address. But if you currently operate as a different business structure and want to convert to an LLC, then you will need to obtain a new ID number from the Internal Revenue Service (IRS). Moreover, a single-member LLC that brings on new members must also obtain an EIN.
When operating as an LLC, you can elect to be taxed as a corporation (for multi-member LLCs), sole proprietorship (for single-member LLCs), or a partnership (for multi-member LLCs). Therefore, if you operate a sole-member LLC, then you will automatically be taxed as a sole proprietorship. If you operate as a multi-member LLC, then you can choose to be taxed as an S corp, C corp, or partnership. If you do in fact elect to be taxed as a corporation, then you will need to obtain an EIN.
Benefits of an EIN
There are many benefits to having an EIN, some of which include the following:
- An EIN is usually required to open a business bank account
- The EIN is used on all company tax and banking documents, which helps identify your LLC
- Banks will generally require that the LLC provide a copy of the Articles of Organization as proof that your business is a separate legal entity from the LLC owners; however, if you have an EIN, you might not need to provide this document as the EIN itself proves that you are a separate and distinct legal entity
- Some vendors and suppliers might not want to do business with an LLC that doesn’t have its own EIN
- Having an EIN allows LLCs to purchase products at wholesale value from certain vendors
How to Apply for an EIN
Applying for an EIN is simple and straightforward, and can be done entirely on the IRS website. There is no fee associated with this request.
If you want, you can also fax or mail in the EIN request to the IRS. The document that you will need to fill out, Form SS-4, is a short document that simply requires you input your business name and address. But you will need to include the drafter’s personal SSN when submitting the request. If the person drafting the request is drafting it on behalf of a business that operates as the actual owner, then you will input the business’s EIN on the document. If you are an owner who is a foreign national, then you will include your ITIN.
Therefore, if you operate a multi-member LLC, you will have only one party (referred to as the responsible party) draft the actual request that will be submitted to the IRS.
If you need help learning more about the EIN request process, 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.