LLC ATTORNEY BLOG

Do I Need an EIN for my LLC?

June 28, 2024

An Employer Identification Number (EIN), or Federal Employer Identification Number (FEIN), is a unique nine-digit number assigned by the IRS to your business. This number is essential for identifying your business as a unique tax entity. Starting January 1, 2024, every LLC, regardless of size or employee status, is required to obtain an EIN to ensure compliance with federal regulations.

In this article, we’ll review how EINs apply to different types of LLCs and what special circumstances could affect your EIN requirements.

Does Your Limited Liability Company (LLC) Need an EIN?

Single Member LLCs

With the launch of the Corporate Transparency Act as of January 1, 2024, all single-member LLCs are mandated to have an EIN or provide the social security number of the sole owner. This new rule applies to every single-member LLC to meet federal tax and legal compliance, simplifying the process of identifying business entities for taxation and legal purposes. In these cases, the company would have to file a Beneficial Ownership Information (BOI) Report. Who qualifies as a beneficial owner? Beneficial owners can fall into any of three categories: any individual who has either significant influence on the reporting company’s decisions or operations, or who owns a minimum of 25% of the company’s shares, or has a similar amount of control over company equity. While it is technically possible to file a BOI report without obtaining an EIN by using the sole owner's social security number, we strongly caution against it because it undermines limited liability protection, limits the company’s ability to change its tax status in the future, and can cause confusion.

Multi-Member LLCs

Similarly, multi-member LLCs require an EIN not only for tax purposes but also to comply with broader federal regulations. This applies whether the LLC opts to be taxed as a corporation or a partnership. An EIN is necessary to facilitate the correct filing of tax returns — corporate tax returns if taxed as a corporation, or partnership returns if operating as a pass-through entity where each partner reports their share of income on personal tax returns.

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Special Circumstances

Because your EIN application depends, in part, on the type of business structure your organization claims, you should make sure that you’ve considered all unique circumstances that could impact your tax filing status.

Some special circumstances would require an LLC to apply for and obtain a new EIN, even if they had one previously. Some of these circumstances could include:

  • If the business claims S Corp tax classification status
  • If the business owner passes away, their estate will manage the business
  • If the business has been purchased or inherited and will be run as a sole proprietorship
  • If multi-member LLC becomes a single-member LLC and the listed “responsible party” is no longer affiliated with the LLC, a Form 8822-B must be filed to update the contact information for the EIN’s responsible party
  • If an LLC owns other LLCs as subsidiaries – in which case, each LLC is required to have its own unique and separate EIN, while the parent/holding LLC company will maintain its original EIN

To read more about the difference between LLC structures, see our Ultimate Guide to EINs.

Why Getting an EIN Could be a Game Changer for Your LLC

Obtaining an EIN is now mandatory for all LLCs as of January 1, 2024. Beyond legal compliance, an EIN offers significant advantages that can transform how you manage and grow your business.

  1. Financial Clarity and Security An EIN creates a clear separation between your personal and business finances, crucial for limiting personal liability in financial or legal issues. This distinction ensures that your personal assets are protected from business liabilities.
  2. Banking Made Easy While not all banks require an EIN to open business accounts, having one generally facilitates smoother and faster account opening processes. An EIN also broadens the range of banking products available to your business, enhancing your financial operations.
  3. Safeguard your IdentityUsing an EIN instead of your Social Security Number (SSN) for business transactions reduces the risk of identity theft. It keeps your personal information secure by associating all business activities with your EIN.
  4. Building Business CredibilityPossessing an EIN boosts your business’s credibility with vendors, partners, and clients. It signals that your business is established and reliable, and can help you build a strong credit score through responsible financial practices like timely payments on credit facilities.
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How to Apply for an EIN

Applying for an EIN can be completed online, via mail, or fax. We recommend applying for your EIN online for the fastest turnaround.

The first step in applying for an EIN, when applying by fax or mail, is preparing an IRS Form SS-4. Applying for your EIN online does not require you to prepare a Form SS-4. For more information, you’ll need to correctly fill out the form and check out our Ultimate Guide to EINs.

You should be prepared to answer a few additional questions on your application, such as:

Does your business own a highway motor vehicle with a taxable gross weight of 55,000 pounds or more?

Does your business involve gambling/wagering?

Does your business need to file Form 720 (Quarterly Federal Excise Tax Return)?

Does your business sell or manufacture alcohol, tobacco, or firearms?

How many members are there in the LLC?

Do you expect your employment tax liability to be $1,000 or less?

FAQS

With the new regulations, all LLCs require an EIN, eliminating the option for single-member LLCs to use only the owner's SSN for business transactions. This change ensures uniformity in how businesses are identified and taxed, providing clearer and more consistent financial documentation.

EINs are specific to the business entity to which they are issued and cannot be transferred or reused, even if the business closes. If there is a significant change in your business structure, such as converting from a multi-member LLC to a single-member LLC, as discussed above, you may need to apply for a new EIN to reflect this change.

For detailed guidelines on when and how to apply for a new EIN, please see the Ultimate Guide to EINs.

Applying for and obtaining an EIN is a FREE service the IRS provides. There are no direct costs associated with this process. Please be wary of any company that claims to require payment to apply for, or receive an EIN, from the IRS directly. Many sites have been reported as scam sites dressed up to appear like government websites.

Legitimate services that assist owners in setting up their businesses will never look like, or pretend to be, government sites.

Get Your LLC an EIN Today

Starting January 1, 2024, every LLC, including single-member LLCs without employees, is required to have an Employer Identification Number (EIN). This new mandate makes it essential for all LLCs to obtain an EIN to ensure legal and tax compliance.

Applying for an EIN is a straightforward process that unlocks many benefits for your LLC. It facilitates better financial management, enhances your business credibility, and ensures that your operations comply with federal regulations. Get your EIN today to position your business for successful growth and operational efficiency.

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