Acquiring an LLC tax ID is an important part of forming your limited liability. Your tax ID allows the Internal Revenue Service to identify your company so you can pay your required taxes. 

Introduction to LLC Tax ID

There are several steps you must complete when forming your limited liability company (LLC) to make sure you are complying with federal and state tax regulations. It's important you understand these rules so you're able to fulfill your company's tax obligations. For instance, LLCs that have employees must obtain a tax identification number. These numbers are issued by the IRS.

Once your ID has been issued, the IRS will use the number to identify your business's taxes. Essentially, a tax ID number functions in the same way as a Social Security number. Multi-member LLCs and LLCs with employees are required by law to acquire one of these numbers.

If you are the sole owner of your limited liability company and are planning to hire an employee, you will need to obtain a federal tax ID number before doing so. Single-member LLCs without employees do not need a tax ID. Instead, you would use your Social Security number when filing your taxes.

One of the benefits of having a tax ID number is that it can help prevent identity theft by eliminating the need to provide vendors or other clients with your Social Security number. 

Your tax ID number is exclusive to your LLC, and it contains nine digits. Acquiring a tax ID number is very easy. All you must do is fill out a single form and then submit it to the IRS.

The IRS issues tax ID numbers to a variety of businesses:

After obtaining your tax ID number, you will be able to complete several tasks that are crucial to your LLC:

  • Opening a business bank account
  • Applying for a credit card for your company
  • Obtaining required business permits

Like the IRS, banks can use your tax ID number to identify your LLC. In addition to your tax ID number, banks will also request a copy of your Articles of Organization before opening your business bank account. This document proves that the members of the LLC and the company itself are legally separate.

It's common for vendors to refuse to do business with an LLC that has not acquired a tax identification number. A tax ID is required for LLCs that wish to offer goods or services to the general public. If you have a tax ID number, you may also be able to make wholesale purchases from vendors much more easily.

Businesses that are converting to an LLC from a different business structure will need to apply for a completely new ID number. Corporations that are transitioning to an LLC will also need a new tax ID. If you are transitioning from an LLC with a single member to a multi-member LLC, you will need to apply for a new ID. Tax ID numbers are also mandatory for LLCs that are electing to be taxed as a corporation.

You do not need a new ID number when altering the location or name of your LLC. A partnership that transitions into an LLC can use their current tax ID as long as they still elect to be taxed as a partnership.

A tax ID is required to complete several tax related tasks:

  • Processing your company's payroll
  • Registering for state taxes
  • Reporting excise taxes

You must use your tax ID number to issue a 1099 if your company provides yearly service to a business or person that earns more than $600. LLCs need to protect their tax ID number as carefully as individuals guard their Social Security numbers. 

LLC Establishment Confirmation

You must complete all paperwork necessary for your LLC before you will be able to apply for your tax identification number. In most cases, your LLC paperwork can be completed online at the Secretary of State website for the state where you are registering your company. When completing your paperwork, you will need to list the name and location of your LLC, as well as the names of all your members. Make sure that you have filed your Articles of Organization and that all required fees have been paid.

If you need help applying for your LLC tax ID, you can post your legal needs 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.