Every LLC business owner needs to have a social security number that can allow both the employers and the employees to file the taxes, deal with the payrolls, and many other functions. This unique number assigned to every Limited Liability Company business structure and the employees working under it is known as the EIN or the Employee Identification Number. Every LLC has a need for EIN, which is only issued by the IRS department of the US.
However, you can’t file for the EIN unless the entire LLC business entity registration process is completed and you have the legal document stating the operations, business name, date of formation, and other attributes. Filing for the EIN is definitely easy since you will have the EIN assistant with you. But, before that, you have to understand the requirement of your LLC business and act accordingly.
On this page, you’ll learn about the following:
When to Get an EIN for an LLC
Once your business corporation is established with all the attributes being mentioned clear in a legal document, all business owners will be able to apply for the EIN. But, before that, you will have to learn when exactly the EIN number is needed.
- If the business corporation has employees working under the parent name, it is essential for all business owners to submit an application for the EIN number since they will have to file the taxes and also check the payrolls.
- If your business corporation is multi-member based, the EIN number is essential since filing the tax returns, and the partnership report is not possible without the nine-digit number.
- If your business corporation is involved with the excising of the taxes on income, the IRS will ask for the EIN number of the notified taxpayer related to your business licenses.
Type of LLC Structures That Need EIN
Even though every LLC business structure will need the EIN, there are certainly exceptional cases where you won’t have to file for the number with IRS. Here, we have discussed when to file and when not to, based on the LLC business corporation type.
Sole Proprietorship LLC
If your LLC business is based on the sole proprietorship structure, you will have to file for the EIN only if you have employees working under the business name. However, if you are the only responsible party of the business, there is no need to file for the EIN. Also, since you will have the sole proprietorship with no other employees working, you won’t have to file the employee pension tax, and hence, there will be no need to file the EIN.
For a single-member LLC, you will have two conditions as a responsible party. If the company has no working employees under the business name, no EIN number is needed, and hence, you won’t have to go through the hectic process of filing the application. But in case your single-member LLC has employees, it is essential to file for the EIN, no matter how many employees you have.
For the multi-member LLCs, you need to file the EIN number, regardless of the employees working in your company, as a responsible party. Even if there is no working employee, you still need to have the EIN because, whether their multiple members, the tax is calculated based on the individual partnership profit report.
How Does an EIN Benefit an LLC
Truth be told, the EIN number acts as a specialized social security number for every LLC. It not only helps you in filing the taxes all the time but also manages the corporate veil and prevents identity theft. Since it is very important to have the EIN, we have explained here some of the perks of this number.
- Filing the taxes and avoid penalties
All the businesses need to file various forms of taxes, starting with the sales tax, the income tax, the pensioner tax, and so on. Every LLC business will need the EIN number to file these taxes. Without it, you will get tax penalties, which might not be good enough for your business’s growth and tax purposes.
- Protecting your identity
If you had to use the SSN number in your LLC business, high chances of identity theft would have developed. Since a unique number is needed for every financial transaction done by this type of business, you would have to use the SSN number frequently with no security. This is why having the EIN will help you to prevent the SSN number from getting public or, worse, stolen by hackers.
- Allowing you to maintain the corporate veil
A corporate veil is a logical business structure that allows the members of the LLC to protect their personal assets with having no liability to pay off the company’s debts and resolve the lawsuits. To maintain this corporate veil, you will need the EIN number at the earliest for your business entity.
- Open the business bank account
All the organizations need to have a separate bank account that will record all the transactions related to the LLC. With the EIN number in hand, you will be able to open the bank account easily.
- Get further business credits and easy loan approval.
Sometime in the future, you may be needing a loan for which maintaining all types of business credit is essential. EIN will help you to increase the business credit and also acts as a catalyst and speeds up the loan approval against your business accounts.
How to Find Employer Identification Number
You can find the Employer Identification Number from computer generated receipts issued by the IRS. You can also search for it through the IRS helpline at 800-829-4933.
Finding an Employer Identification Number might sound like a daunting task, especially for first-time business owners. Yet, with a little guidance and knowledge about the process, you’ll find that it’s a relatively straightforward endeavor. Here are some general steps to help you navigate your way to securing an EIN.
The first method, and perhaps the easiest one, is applying online. The IRS provides an online application, which is available all day, every day, making it extremely convenient. To fill out the application, you’ll need to gather information such as the legal name of your business, your Social Security Number or Individual Taxpayer Identification Number, your business structure, and the reason for applying. After submitting your online application, you’ll receive an EIN instantly if all the information provided is accurate.
Alternatively, you can apply for an EIN via mail or fax. This method is especially useful for those who don’t have access to internet services or prefer a more traditional approach. To apply by mail or fax, you need to complete Form SS-4, which you can download from the IRS website. Once you have filled out the form, you can submit it by mail or fax it to the appropriate IRS unit. Although the processing time for these applications is longer, you can still expect to receive your EIN within a couple of weeks.
Another option, employed widely by third-party professionals such as Certified Public Accountants (CPAs) or attorneys, is authorizing someone to obtain an EIN on your behalf. This method might be helpful for business owners who don’t have the time or inclination to navigate through the process themselves. To do this, fill out Form 2848, Power of Attorney and Declaration of Representative, appointing the chosen individual as your representative. You can then authorize them to apply for an EIN using their own personal information. Remember to select an experienced and trusted representative whose expertise you can rely on.
Lastly, individuals who are not based in the United States but want to establish a business entity in the country might have additional considerations when obtaining an EIN. In such cases, the IRS requires the business owner to have a U.S. mailing address or possess a third-party designee. Revocable trusts, for instance, can use the services of a trustee residing in the United States. Nonresident business owners should also follow specific instructions provided by the IRS to ensure they fulfill all requirements.
In conclusion, regardless of which method you choose, obtaining an Employer Identification Number doesn’t have to be a complicated ordeal. With various options such as online applications, mail or fax, and authorizing representatives, the process has become more accessible, simplifying the lives of many entrepreneurs. Remember to carefully provide accurate information, and consult a professional if you feel uncertain about any step along the way. Once you secure your EIN, you can embark on running your business smoothly and in line with federal regulations.
How to Apply for an EIN
In order to apply for the EIN online application, you need to visit the official website of IRS, where you will get the EIN assistant. With the help of the assistant, you can easily file for the 9-digit ID numbers, and it will be displayed to you once the form is submitted with all the correct details. Try the application by mail or fax the EIN application form with other required documents to the IRS in case you are not in an emergency. For better knowledge, hiring an attorney will help you plan everything related to the EIN forms.
Employer Identification Number is an essential thing when you start your business. You may be wondering if your LLC needs to obtain an EIN or not. Yes, it is a mandatory requirement for any LLC to obtain EIN. If you have hired an LLC formation service provider then you do not need to worry about the EIN, they help you with that. But if you haven’t hired anyone yet, then you can apply for EIN by yourself through the IRS portal.