EIN for LLC: Does an LLC need an EIN?

Need an EIN for Your LLC? Let Commenda Assist You

What Is an EIN?

Think of an Employer Identification Number (EIN) as the social security number for your business. When you start a US LLC, you will get an EIN to file taxes with the IRS. You will also use this number to make a bank account, apply for loans, and broadly navigate the US business environment.

This blog aims to answer the following questions:

1. What is an EIN?
2. Does your LLC need an EIN?
3. How to get an EIN for your LLC?
4. How to maintain an EIN?

Why Does Your LLC Need One?

An Employer Identification Number (EIN) is a nine-digit number issued by the IRS to identify your LLC for tax purposes. Think of it as a Social Security number for your business. Whether you’re opening a business bank account, filing taxes, hiring employees, or building business credit, an EIN is essential for navigating the U.S. business landscape. In this guide, we’ll walk you through everything you need to know about EINs for LLCs.

When Is an EIN Required for Your LLC?

Not all LLCs need an EIN, but there are several situations where it becomes necessary. Here’s when you will need one:

• Multi-Member LLCs: Typically classified as partnerships by the IRS, multi-member LLCs must obtain an EIN if they have employees, or if they wish to establish business credit.
• Single-Member LLCs: While a single-member LLC can often use the owner’s Social Security Number (SSN) for tax purposes, an EIN is required if the LLC elects to be taxed as an S or C Corporation, or if it has employees.
• LLCs with Employees: Regardless of whether the LLC is a single-member or multi-member LLC, if you have employees, an EIN is mandatory for reporting payroll taxes and withholding income taxes.

How to Apply for an EIN for Your LLC: A Step-by-Step Guide

Getting an EIN for your LLC is simple and free. Follow these steps to apply:

1. Check Eligibility: Ensure your LLC is legally formed and registered with your state.
2. Apply Online: The IRS offers an easy, free online application. You’ll complete the SS-4 form, and receive your EIN instantly. Apply Here.
3. Alternative Methods: If you prefer, you can apply by mail, fax, or phone. More details are available on the IRS website.

Can You Use Your Personal SSN Instead of an EIN for Your LLC?

In some cases, you can use your SSN instead of an EIN, especially if you are a sole proprietor or single-member LLC with no employees. However, for added protection and easier business management, it’s recommended to apply for an EIN, even if you don’t need one for tax filing.

Is an EIN Necessary for All LLCs?

While it’s not required for every LLC, obtaining an EIN offers many benefits. For example, even if your LLC doesn’t have employees, having an EIN helps with opening a business bank account, applying for business credit, and keeping your personal and business finances separate.

What Happens If Your LLC Doesn’t Have an EIN?

Without an EIN, you may face difficulties when opening a business bank account, applying for loans, or filing your LLC’s taxes. Additionally, without an EIN, your LLC may not be able to establish business credit, which could hinder growth opportunities.

Do Multi-Member LLCs Always Need an EIN?

Yes, multi-member LLCs are typically considered partnerships by default. Since partnerships generally need an EIN to file taxes, multi-member LLCs will need one, especially if they have employees or want to establish business credit.

The Cost of Obtaining an EIN for Your LLC

Getting an EIN for your LLC is completely free when you apply directly through the IRS. There is no charge for the application or the issuance of your EIN number.

How Long Does It Take to Get an EIN for Your LLC?

If you apply online, you’ll receive your EIN immediately after completing the application. If you apply by mail, fax, or phone, it may take a few weeks for the IRS to process your request.

What to Do if You Lose Your LLC's EIN?

If you misplace your EIN, you can retrieve it by calling the IRS’s business assistance line. They’ll verify your identity before providing you with the number again.

Can an LLC Get an EIN Before Registering with the State?

No. Your LLC must be legally registered with the state before you can apply for an EIN. The EIN is linked to your LLC’s legal status, so it’s important to complete your state registration first.

How to Change or Update Your LLC’s EIN

In most cases, an EIN remains the same for the life of the LLC. However, if your LLC undergoes significant changes, like a change in legal structure (e.g., from a sole proprietorship to an LLC), you will need to apply for a new EIN. To update your EIN information, contact the IRS directly.

Common Mistakes to Avoid When Applying for an EIN for Your LLC

• Incorrect Information: Ensure that the LLC’s name, address, and other details match the information on your state registration documents.
• Not Applying for the Right EIN Type: Verify whether your LLC needs an EIN for tax purposes or simply to open a business account or hire employees.
• Delaying the Application: Apply for your EIN as soon as your LLC is formed to avoid delays in business operations.

What Are the Ongoing Compliance Requirements After Receiving an EIN?

Once you have your EIN, there are a few ongoing requirements to keep in mind:

• File Annual Taxes: Your LLC must file annual tax returns, and depending on its structure, it may be required to file federal, state, and local tax returns.
• Report Changes: If your LLC changes its legal structure, name, or business address, notify the IRS to keep your EIN records accurate.

Should You Use an EIN or SSN for Your LLC’s Business Bank Account?

It’s generally recommended to use an EIN for your LLC’s business bank account. This helps to keep your personal and business finances separate, making accounting, taxes, and legal matters clearer. An EIN also offers additional privacy protection, as it keeps your SSN confidential.

Conclusion:  EINs - A Valuable Tool for LLCs

Understanding EINs and their role in LLCs is essential for new business owners.  While not mandatory for all LLCs, obtaining an EIN offers significant advantages.  From simplifying tax filing to establishing business credit, an EIN can be a valuable tool for managing and growing your LLC.  

If you have any questions regarding EINs or LLC formation, sign up for a free consultation with Commenda:

Schedule an EIN/LLC formation consultation call with →

FAQs:

What is the cost of getting an EIN for my LLC?

Applying for an EIN for your LLC is completely free through the IRS website. An EIN is simply an identification number that the US Government will assign your business; there is no associated cost.

Does a single-member LLC need an EIN?

In most cases, a single-member LLC does not require a federal tax ID number, as the individual's Social Security number can be used for federal income tax purposes.

However, if the single-member LLC is classified as a taxable disregarded entity and has employees, it must pay federal employment taxes or excise taxes.

While not always mandatory, many single-member LLCs choose to obtain a federal tax ID number to facilitate opening a business bank account or conducting other business activities.

Keep in mind that foreign nationals registering LLCs in the US will likely want to apply for an EIN even if planning to operate a single-member LLC.

Do I need to renew an EIN?

There are no renewal processes or fees associated with maintaining your EIN.  Once issued, it remains valid indefinitely.  However, it's crucial to keep the IRS informed of any changes to your business name or legal structure to ensure the accuracy of your EIN records.

How does an EIN protect my assets?

An Employer Identification Number (EIN) plays a crucial role in establishing a distinction between you and your business, ensuring limited liability protection in the event of legal action against your company.

What if I misplace my LLC EIN?

If you've misplaced your Employer Identification Number (EIN), you can retrieve it by calling the IRS's Telephone Assistance for Businesses, available Monday through Friday. Upon verification of the caller's identity as the responsible party, the IRS will provide the EIN.

Can I change my EIN from sole proprietorship to LLC?

Yes, you can! You cannot directly transfer it. You will have to apply for a new EIN for the LLC by filing the form SS-4 on the IRS website.

‍