Do I need a EIN for an LLC? If your LLC is multi-member it must get an EIN for tax reporting. If your LLC is single-member it only needs an EIN if it hires employees or pays excise tax. Below we will walk you through everything you need to know about an LLC EIN.
LLC EIN
Are you a business owner? Have you recently formed an LLC? You may be wondering if you need to apply for an EIN. Depending on how your company is operated, you may be required to obtain an EIN for your LLC to facilitate tax reporting.
EIN FOR LLC
- What Is an EIN?
- When Does an LLC Need an EIN?
- How Do I Get an EIN?
- Benefits of Getting an EIN
- Frequently Asked Questions
WHAT IS AN EIN?
An EIN is an Employer Identification Number. It is a unique nine-digit number used by the IRS (Internal Revenue Service) to identify a company. It acts like a social security number for a business.
A business uses an EIN to file a tax return in the same way an individual uses a social security number. It is sometimes referred to as an FTIN (Federal Tax Identification Number) or FEIN (Federal Employer Identification Number).
WHEN DOES AN LLC NEED AN EIN?
The requirement for an LLC to get an EIN will depend on whether it is a single-member or multi-member LLC. The situation for multi-member LLCs is simple. If an LLC has more than one member it must get an EIN for tax reporting. However, the situation is a little more complex for single-member LLCs, see below.
MULTI-MEMBER LLC
All multi-member LLCs must get an EIN. If the LLC has more than one owner it must apply for an EIN – regardless of its tax classification.
SINGLE-MEMBER LLC
The situation for a single-member LLC is determined by its tax classification. If the LLC has been classed as a corporation for tax reporting – it must get an EIN. However, if it is a disregarded entity its income is treated as the same as its owner. An LLC that is recognized as a disregarded entity does not have to apply for an EIN – unless it meets one of the two exceptions below.
EMPLOYEES
If the company hires or intends to hire employees it must get an EIN.
EXCISE TAX
If the company will be subject to excise tax it must get an EIN.
HOW DO I GET A EIN FOR AN LLC?
You get an EIN for free by applying directly to the IRS. It is a simple process and you can process your application online, by mail, or by fax. The quickest and easiest way to get your LLC EIN is to apply online. Note, IRS hours of business are 07:00-22:00hrs Monday to Friday, eastern standard time.
APPLY ONLINE
You can request an EIN for your LLC using the IRS website. If you want an EIN quickly this is your best option. An EIN will be issued to you once the online form has been successfully completed. Note, that your application must be completed in one session – you cannot save your progress and resume at a later period.
APPLY BY MAIL
If you prefer, you can apply for an LLC EIN by standard mail. The process will take a little longer but is equally as effective. To apply by mail you will need to complete form SS-4 and submit it by post to the IRS. If your application is approved, your EIN will be issued to you by post.
APPLY BY FAX
You can also apply for an EIN by fax. Simply, complete form SS-4 and fax it through to the IRS. If everything is in order you can expect to have your EIN issued to you by fax within four days.
SHOULD YOU GET AN EIN FOR YOUR LLC?
‘Should You Get an EIN’ is a different question to ‘Do I Need a EIN for an LLC’? If there is a legal requirement for you to get an EIN for your company – you must get an EIN. However, it may be in your interest to get an EIN even if you are not required to by the IRS. There are several benefits associated with getting an EIN – see below.
BENEFITS OF GETTING AN EIN
What are the benefits of getting an EIN? Below are the key advantages of getting an EIN – even if your LLC is not required to have one.
OPEN A BUSINESS BANK ACCOUNT
Most banks require an EIN to open a business bank account. A business bank account allows you to keep your personal and business finances separate. This will simplify your bookkeeping process and ensure efficient accounting. If you plan on opening a business bank account you should apply for an EIN.
ESTABLISH BUSINESS CREDIT
Financial institutions such as banks and credit agencies use an EIN to track a business’s credit. If your business has a strong credit rating it will be able to take advantage of better and cheaper financial services. Securing an EIN is the first step in establishing a strong credit rating for your LLC.
ACCESS TO BUSINESS LOANS
If your company has its own bank account and credit history you will find it easier to apply for business loans. Although an EIN is not essential for securing a business loan – it will make things much easier. If your LLC has an EIN, a business bank account, and a strong credit history it will find it easier to secure business loans.
MAINTAIN CORPORATE VEIL
Obtaining an EIN will help protect the corporate veil of your company. An EIN allows you to open a business bank account and create a clear separation between your business and personal finances. This separation will help maintain your liability protection if you are ever taken to court in pursuit of company debts.
FILE TAX RETURNS
If your LLC is a multi-member company or is classed as a corporation for tax – you will need an EIN to file a tax return. The EIN is the identification number the IRS needs to process your LLC’s tax affairs. Unless your company is a disregarded entity you will need an EIN to pay tax. For more see How LLCs are Taxed.
HIRE EMPLOYEES
If your LLC hires or intends to hire employees you must get an EIN. Employers need an EIN to set up a payroll for their employees. The number is needed to pay state employer taxes and withhold income tax on behalf of your workforce.
RELATED
LLC EIN FAQ
DOES A SINGLE-MEMBER LLC NEED AN EIN?
A single-member LLC needs an Employer Identification Number if it will have any employees or if it will have to pay excise tax.
CAN A COMPANY OPERATE WITHOUT AN EIN?
Yes, a company can operate without an EIN. A single-member LLC that hires no employees and doesn’t pay excise tax can operate without one.
IS AN EIN NECESSARY?
Yes, an EIN is necessary for all multi-member LLCs and for single-member LLCs that intend to hire employees or pay excise tax.
DOES THE IRS CHARGE FOR AN EIN NUMBER?
No, the IRS does not charge for an EIN number. You can obtain an EIN for free by applying online, by mail, or by fax to the IRS.
SHOULD I USE SSN OR EIN?
For a company, you should use an EIN. The exception is if you own a single-member LLC and it is classed as a disregarded entity. In this scenario, you can pay tax on company earnings as part of your personal tax return using your SSN.
DO I NEED AN EIN IF I HAVE NO EMPLOYEES?
If you have a single-member LLC with no employees and will not be paying excise duty then you do not need an EIN.
WHAT HAPPENS IF YOU DON’T HAVE A BUSINESS EIN?
If an LLC business does not have an EIN it will not be able to pay tax to the IRS unless it is a single-member disregarded entity. All multi-member LLCs must acquire an EIN.
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About the Author
Jason Roth: Editor in Chief
Jason is editor in chief at My LLC Guide. He holds a wealth of business management experience and has been advising companies on business formation issues for many years. Jason specializes in resource planning management, staff utilization, and productivity consulting.
He has worked predominantly in the west coast area where he graduated from the Marshall Business School at the University of South California. When he’s not working in his business advisory role, Jason likes to climb on his Indian Scout motorbike and enjoy the open road.