An EIN offers tax options and financial advantages. An EIN identifies a business entity. Setting up an EIN can give your LLC credibility.
The IRS automatically treats an LLC with over one member as a partnership. An EIN is like a Social Security number for your business. Single-member LLCs with employees or excise tax liability need an EIN.
Most new single-member LLCs need an EIN. A single-member LLC not needing employees or excise tax liability uses the single member owner’s name and TIN.
EIN Eligibility and Requirements
Wondering if a single-member LLC needs an EIN or SSN? The answer depends on circumstances. Single-member LLCs without employees use the owner’s SSN. However, EIN benefits exist even without requirement.
Any business can get an EIN, even a sole proprietorship. However, a sole proprietorship without employees does not need an EIN. There are EIN requirements for single member LLCs.
If single-member or multi-member, you can get an EIN through the IRS. Applying online is fastest, but mail and fax work too. Obtaining an EIN is free in the U.S. A single-member LLC registers with an EIN if it has one employee or excise tax liability.
EIN Application Process and LLC Tax Classification
What Is an EIN and Its Purpose? The Internal Revenue Service (IRS) issues an employer identification number (EIN) to identify a business entity. An EIN may be necessary when filing tax returns or opening a single-member LLC bank account.
What Is the IRS Entity Classification? An LLC is a legal entity established at the state level. For income tax purposes, the IRS classifies an LLC as a corporation, partnership, or as part of the owner’s tax return.
We recommend getting an EIN even if you aren’t required to because having one provides several benefits. You can apply for an EIN with the IRS EIN Assistant for free but you will need to form your LLC before applying for an EIN.
Benefits of Having an EIN
An EIN can help protect your corporate veil. In some states, having an Employer Identification Number (EIN) is required for a Single Member LLC. An EIN is a unique nine-digit number that the IRS issues to businesses for tax identification purposes.
A single-member LLC that is a disregarded entity that does not have employees and does not have an excise tax liability does not need an EIN. It should use the name and TIN of the single member owner for federal tax purposes.
Additionally, many banks require an EIN to open a business bank account and to secure most business loans. If you want your LLC to be taxed as a corporation, you will be required to obtain an EIN.
When to Obtain a New EIN
Do I need a new EIN if I go from single member LLC to multi-member LLC?
You will need a new Employer Identification Number if you change from single to multi-member LLC. Adding additional members can distribute the management responsibilities, share the workload, and potentially reduce the burden of personal liability.
You will be required to obtain a new EIN if any of the following statements are true. A new LLC with more than one owner (Multi-member LLC) is formed under state law.
Whether or not you need to get a new EIN for your LLC depends on whether you own a single- or multi-member LLC. This is because of how these two types of LLCs are taxed.