An employer identification number (EIN) is a nine-digit number used by the Internal Revenue Service (IRS) to identify businesses. If you have no employees, an EIN is optional for a sole proprietorship or single-member LLC. Obtaining an EIN is typically free and fast when registering directly with the IRS.
Multiple Businesses and EINs
In some cases, one EIN can be used for multiple businesses that operate under the same business structure. However, using one EIN does put all businesses at financial risk if one is sued. Different types of taxed entities require separate EINs. Fictitious business names and "doing business as" names do not require separate EINs as long as businesses file proper paperwork with the state, but legally distinct businesses, such as multiple LLCs or different business structures, do need their own EINs.
The IRS does not limit the number of EINs an individual or entity can have. However, having multiple businesses under one EIN can simplify startup processes while potentially leading to legal and tax complications.
Do You Need a New EIN for Multiple Businesses?
The simple answer to the question of how many EINs you are allowed is as many as the number of business entities you have. A single business or entity can have only one, although there are situations where you will need to apply for a new one due to changes to your business.
If you have multiple businesses and they are not established as legally separate entities, you can use the same EIN for all of them. A company can use a single EIN across multiple units with multiple fictitious names, as long as those units aren’t set up as legally separate businesses.
Most new single-member LLCs classified as disregarded entities will need to obtain an EIN. An LLC applies for an EIN by filing Form SS-4, Application for Employer Identification Number.
Strategies for Managing Multiple Businesses
One LLC for Multiple Businesses
One approach involves having one LLC for the original business and then setting up a DBA for the new venture. The most attractive element of owning multiple LLCs under one holding company is the separate liability it offers.
Umbrella LLC Structure
An umbrella LLC is a holding company that owns other LLCs, known as subsidiaries. It shelters those LLCs from liability in litigation. A holding structure is best if spinning off the original business.
Running multiple businesses under one EIN can be more efficient, but shared liability and complex accounting are potential concerns. Advantages include simplicity in starting LLCs and unified filing requirements.
LLCs and DBAs
Using a DBA is beneficial for managing diversified operations and promoting to different markets. A series LLC means one parent LLC managing subsidiary LLCs. This parent LLC organizes and oversees other LLCs while remaining distinct from their operations.