Key Takeaways

  • Registering an LLC with the IRS primarily involves obtaining an Employer Identification Number (EIN), which is necessary for tax filings, hiring employees, and opening a business bank account.
  • The IRS does not form LLCs — that’s done at the state level — but you must still notify the IRS of your business and tax classification.
  • Your LLC’s tax treatment (disregarded entity, partnership, S corporation, or C corporation) affects how you file federal taxes and report income.
  • A responsible party must be designated to manage tax obligations and apply for the EIN.
  • Specialized IRS filings apply if your LLC seeks tax-exempt status or engages in specific regulated activities.

Register LLC with IRS

To register LLC with IRS, you must file the correct forms, which will depend on the ownership of the LLC. As a business owner, the last thing you want to deal with is not properly paying the IRS.

Steps to Register LLC With IRS

After forming your LLC with the state, the next critical step is to register the business with the IRS for tax purposes. While the IRS does not “create” LLCs — that’s handled by the Secretary of State — it does require that every business obtain an Employer Identification Number (EIN) unless it qualifies for a rare exemption. Here’s how to proceed:

  1. Obtain an EIN:
    • Apply online through the IRS EIN Assistant.
    • You can also submit Form SS-4 by mail or fax.
    • This number is used for all federal tax filings, payroll reporting, and most business banking.
  2. Choose Your Tax Classification:
    • Single-member LLCs are treated as disregarded entities by default and report income on Schedule C of the owner’s Form 1040.
    • Multi-member LLCs are treated as partnerships and must file Form 1065.
    • You can elect to be taxed as an S corporation (via Form 2553) or a C corporation (Form 8832).
  3. File for Any Additional Tax Accounts:
    Depending on your business activities, you may need additional registrations for excise taxes, employment taxes, or tax-exempt status (for nonprofit LLCs).
  4. Update IRS Records if Ownership Changes:
    If there are significant changes to your LLC structure or ownership, you must update your IRS records to reflect the new responsible party or tax status.

Limited Liability Company (LLC)

An LLC, also known as a limited liability company, is a form of business that offers pass-through taxing like a partnership or sole proprietorship along with limited liability protections like a corporation.

LLCs protect your personal assets while also claiming your business’s profits on your personal taxes. An LLC will also allow you to choose from different forms of taxation. You can choose to be taxed as a sole proprietorship or an S corporation.

LLCs are the most popular types of business structures in the United States. The IRS defines an LLC as a limited liability that is a structure allowed by state statute.

LLCs are formed by filing articles of organization with your Secretary of State.

The properties of an LLC are:

·      LLC owners are considered members. Members can be individuals, corporations, or additional LLCs.

·      LLCs can be formed by one member or more, with no cap on the number of members.

·      No active LLCs can have the same name within the same state.

·      LLCs have to choose to be treated as a corporation or a partnership with regard to taxation. They are otherwise disregarded as a separate entity.

What Is a Responsible Party?

A responsible party is an individualwho has control over the money and assets in the business that allows him or her to control, directly or indirectly, the business and how its funds are used. LLCs with more than one owner must have one individual that is named the responsible party for obtaining a tax identification number for the LLC. The LLC can have as many owners as it wants, but only one can be the responsible party for applying for the tax identification number.

Importance of the Responsible Party for IRS Purposes

The responsible party plays a critical role when you register your LLC with the IRS. This individual — usually a member or officer with significant control — is the primary point of contact for tax-related matters. They are responsible for applying for the EIN and ensuring all required filings are completed on time.

  • Only one responsible party may be listed on IRS records.
  • If control of the LLC changes, you must notify the IRS within 60 days using Form 8822-B.
  • The responsible party’s Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) must be provided when applying for the EIN.

Benefits of an LLC

There are several benefits of having an LLC, including the following:

1. Protection of Assets: An LLC gives limited liability protection to its members that are not held personally responsible for any debt or obligations of the company. Lenders are not allowed to come after the personal assets of the members to pay any business debt, including bank accounts and property. Partnerships and sole proprietorships are not afforded this protection, leaving them open to business debt.

2. Pass-Through Taxation: In general, LLCs do not pay taxes at the business level. Income or loss from the business is passed through to the owners and reported on their personal income taxes. Taxes are then paid individually.

3. Increased Credibility: Creating an LLC helps a company look more credible with other businesses, associates, employees,and customers. It appears you have made a serious commitment to the business.

4. Few Compliance Requirements: An LLC will not have as many demands as S and C corporations.

5. Flexible Management: An LLC may create any type of organizational structure it desires per the agreement of all members. An LLC may be managed by the owners or supervisors. This is different than corporations that have a board of directors that are in charge of business decisions and management of the day-to-day operations.

6. Fewer Restrictions: LLCs have fewer limitations with regard to who can own an LLC and how many can have ownership.

Federal Tax Compliance and Ongoing Obligations

Registering an LLC with the IRS is not a one-time task. Once your EIN is issued and tax classification is set, you must maintain ongoing compliance with federal tax obligations. Key responsibilities include:

  • Annual Tax Filings: Submit the appropriate tax return (Schedule C, Form 1065, Form 1120S, or Form 1120) based on your election.
  • Employment Taxes: If your LLC hires employees, you must withhold and pay payroll taxes and file Forms 941 or 944.
  • Excise and Specialty Taxes: Certain businesses (e.g., fuel suppliers, alcohol distributors) must register for additional federal excise tax programs.
  • Tax-Exempt Applications: Nonprofit LLCs must meet IRS requirements under Section 501(c)(3) and request a determination letter to receive tax-exempt status.

Failure to comply with IRS requirements can result in fines, penalties, or the loss of favorable tax status.

Taxation of an LLC

A single-member LLC is established when there is only one owner. This type of LLC is taxedlike a sole proprietor. All profits and losses are passed on through the owner’s federal income tax return. If more than one person are members of an LLC, it is then known as a multi-member LLC. This type of LLC is taxed like a partnership. All profits and losses are also passed through to the individual tax returns of all members.

LLCs are also taxed by the state, which will vary. For instance, there is an annual $800 tax on all LLCs, in addition to an income-based annual fee if an excess of $250,000 is earned in a year. This additional tax is why some members choose not to form an LLC if the owner is not persuaded by the liability protection.

Special Considerations for Tax-Exempt LLCs

If your LLC intends to operate as a nonprofit or charitable organization, registering with the IRS involves additional steps. To qualify for tax-exempt status under Sections 501(a) or 501(c)(3), the LLC must:

  • Include specific language in its operating agreement limiting its activities to exempt purposes.
  • Ensure that all members are tax-exempt entities themselves.
  • Apply for a determination letter from the IRS using Form 1023 or Form 1023-EZ.

Nonprofit LLCs are subject to heightened IRS scrutiny, and failure to meet these standards can result in denial or revocation of tax-exempt status.

Frequently Asked Questions

  1. Do I need to register my LLC with the IRS if I don’t have employees?
    Yes. Even without employees, most LLCs need an EIN for tax filings, opening a business bank account, and maintaining compliance.
  2. Can I use my Social Security Number instead of an EIN?
    Single-member LLCs without employees can use the owner’s SSN, but obtaining an EIN is recommended for privacy and professionalism.
  3. How long does it take to get an EIN?
    If you apply online, you’ll receive your EIN immediately. Applications by fax or mail can take several weeks.
  4. Can my LLC change its tax classification later?
    Yes. LLCs can elect to change from a default classification to an S or C corporation by filing the appropriate election forms with the IRS.
  5. What happens if I don’t register my LLC with the IRS?
    You may face penalties, miss tax filing deadlines, and encounter difficulties opening bank accounts or hiring employees.

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