Key Takeaways:

  • All partnerships must obtain an EIN (Employer Identification Number) from the IRS for tax filing and compliance purposes.
  • EINs are essential for opening business bank accounts, hiring employees, and filing tax returns.
  • Sole proprietors and single-member LLCs without employees may not need an EIN.
  • Obtaining an EIN is free through the IRS website, via fax, mail, or phone.
  • Partnerships must file Form 1065 annually, distributing profits and losses via Schedule K-1.
  • State-level EIN requirements may differ, and businesses should check their state's tax agency for additional requirements.
  • Foreign partnerships can apply for an EIN even without a Social Security Number.
  • Processing times for EIN applications vary depending on the submission method.

A partnership EIN is an Employer Identification Number given to a partnership for federal income tax purposes. Essentially, the EIN is the Social Security Number for the business. Most companies will obtain an EIN for federal tax purposes, even if the company isn’t required to file federal taxes. The reason for this is to separate the business from its owners and open a business bank account.

Does a Partnership Need a Separate Tax ID?

Most businesses, including partnerships, must register with the Internal Revenue Service (IRS), along with state and local agencies. For that reason, the business must obtain an EIN. This nine-digit number is issued by the IRS (Form SS-4) and is used to identify your business when submitting tax documents.

Keep in mind that not all business structures are required to obtain an EIN. For example, most sole proprietors utilize their personal Social Security Number as opposed to a business EIN, as the business itself isn’t required to pay federal taxes. Instead, the profits and losses of the sole proprietorship are reported on the sole owner’s personal income tax return. Keep in mind that if you plan on hiring employees for your sole proprietorship, you will be required to obtain an EIN.

Furthermore, those operating a single-member LLC with no employees, meaning that you are the sole owner and have no other owners or employees assisting you in your business operations, then you need not obtain an EIN. However, if you are not the sole owner or if you have employees working for you, then you will need to obtain a separate EIN for your LLC. The reason for this is because any business with employees will have additional tax requirements to abide by; these tax requirements require you to utilize a business EIN rather than a personal Social Security Number. Moreover, if there is more than one owner, such owners cannot use their personal Social Security Numbers. Instead, the IRS requires that you use a business EIN when submitting tax documentation.

However, all partnerships are required to obtain an EIN. While a partnership involves two or more people, they are only required to obtain one EIN. Come tax season, the partners will fill out Form 1065 Schedule K-1, which will assist them in identifying their self-employment income during that taxable year.

EIN Requirements for Different Types of Partnerships

While all partnerships require an EIN, the application process and tax obligations differ based on the partnership type:

  • General Partnerships (GPs): Must obtain an EIN and file Form 1065 to report income, though taxes are passed through to individual partners.
  • Limited Partnerships (LPs): Similar to GPs, but limited partners may have different tax treatment.
  • Limited Liability Partnerships (LLPs): Required to get an EIN and comply with both federal and state-level tax filings.
  • Foreign Partnerships: Can apply for an EIN without a Social Security Number (SSN) by submitting Form SS-4 and specifying their foreign status.
  • State-Registered Partnerships: Some states require additional filings, such as state-level tax IDs for payroll taxes.

Benefits of Obtaining an EIN

There are many benefits of obtaining an EIN, including the following:

  • You can open a business bank account in the name of your business.
  • You can apply for credit or loans through the business without having to personally guarantee the loan(s).
  • You can obtain business permits and other applicable licenses.
  • You can provide any independent contractors that work for your business with a 1099 form, which is required under federal law.
  • It can provide additional privacy due to the fact that you are not utilizing your personal Social Security Number.

Tax Implications of Having an EIN

An EIN plays a crucial role in a partnership’s tax obligations:

  • Filing Requirements: Partnerships must file Form 1065 annually to report income and deductions, while individual partners report their share of profits on their personal tax returns.
  • Employment Taxes: If a partnership has employees, it must withhold and remit payroll taxes using its EIN.
  • Excise Taxes: Businesses engaging in activities such as alcohol sales, trucking, or wagering must use their EIN for excise tax filings.
  • Avoiding Identity Theft: Using an EIN instead of a Social Security Number helps protect business owners from fraud.

What You Need to Obtain an EIN

In order to obtain an EIN, you can simply visit the IRS website and visit the request portal. You can request an EIN online, by mail, over the phone, via fax, via e-mail, or in person. Due to the great flexibility in how to obtain an EIN, it is a very simple and straightforward process that should be done immediately after forming your business. With that said, there a few things that you need in order to obtain your EIN. Such information is as follows:

  • Business address
  • Business owner or officer
  • Number of members if you operate an LLC
  • Date the company began doing business
  • Type of business
  • Number of employees
  • Contact info where you can be reached, i.e., telephone, email address, etc.

If you are faxing your request, you can expect a return fax with your new EIN within four business days. If you choose to mail the SS-4 form, it could take up to a few weeks, depending on how long it takes for the IRS to first receive your request by mail. Thereafter, you will have to wait additional time to have the IRS review and approve your request and mail the ID number to you. The quickest way to submit your request is online, as it takes as little as an hour to receive your EIN.

How Long Does It Take to Get an EIN?

The processing time for an EIN depends on how you apply:

  • Online: The fastest method—an EIN is issued immediately upon completion.
  • Fax: Processing takes about four business days if the SS-4 form is submitted via fax.
  • Mail: The slowest option, taking four to six weeks for the IRS to process.
  • Phone (for international applicants): Takes up to two weeks, as the IRS manually processes these applications.

For the quickest results, businesses should apply online through the IRS website.

Frequently Asked Questions

  1. Can a partnership operate without an EIN?
    No, all partnerships are required to obtain an EIN for tax filing and reporting purposes.
  2. Can a foreign partner apply for an EIN without a Social Security Number?
    Yes, foreign partners can apply using Form SS-4 and indicate “Foreign” in the SSN field.
  3. How much does it cost to obtain an EIN?
    It is free to apply for an EIN through the IRS website or by mail, fax, or phone.
  4. Do I need to renew my EIN?
    No, once issued, an EIN never expires and does not need renewal.
  5. Can a partnership use one of the partner’s Social Security Numbers instead of an EIN?
    No, the IRS requires partnerships to use an EIN instead of a personal SSN for tax and business purposes.

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