An EIN (employer identification number) is a nine-digit number assigned to a business by the IRS for tax identification purposes. Limited liability companies (LLCs) with employees or more than one owner are required by law to acquire an EIN, but not all single-member LLCs are required to get one. Still, there are some compelling reasons for even these LLCs to have an EIN.
Some single-member EINs are allowed to use the owner’s Social Security number instead of an EIN when filing federal taxes. But having an EIN can help single-member LLC owners further separate their personal and business financials, open business bank accounts, safeguard against identity theft, and establish a credit history for their business.
A single-member LLC is a business structure that offers liability protection and is operated by a single owner; LLC owners are called “members.” Unlike multi-member LLCs, an LLC with a single owner is generally not required to have an EIN unless they have employees or meet other criteria where the IRS explicitly requires an EIN for federal tax purposes. Depending on the state you live in and the goals for your business, using an EIN can be a beneficial tool to operate your business, regardless of whether or not it’s legally required.
The IRS requires a single-member LLC to have an EIN if any of the following apply:
Some states require all LLCs to acquire an EIN for state tax purposes, and certain business licenses and permits also require one. In addition, most banks will require a single-member LLC to have an EIN before opening a business bank account.
By default, a single-member LLC is treated as a “disregarded entity” by the IRS, meaning that they don’t acknowledge the LLC as a taxable entity and instead treat the business as a sole proprietorship. A disregarded entity is not considered a registered business for federal tax purposes, and taxes for the business are collected through the owner’s personal income tax return.
This allows single-owner LLCs to avoid “double taxation” by having their business profits pass through to their personal tax returns without first being taxed at the business level. In a typical corporation, profits are taxed at the business level and again when they’re distributed to the individual owners.
Even if a single-member LLC falls into the category of LLCs not required to get an EIN, there are still plenty of reasons to have one:
To get an EIN for an LLC, you must file an EIN application with the IRS. The cost of an EIN is $0. You can receive your EIN immediately by filling out an online application through the IRS website, or by printing and filling out an SS-4 form to be either faxed or mailed to the IRS. In order to apply for an EIN you must complete the following steps:
Single-member LLCs can choose to be taxed as a sole proprietorship, an S corporation, or a C corporation. In order to change the tax status of your LLC to a C corporation, you must file Form 8832 (Entity Classification Election) with the IRS in addition to your EIN application. You need to file Form 2553, Election by a Small Business Corporation, to get S corporation status. Learn more on our how to apply for S corp status page.
Information about your business includes listing yourself as the sole owner of the LLC (no additional members), choosing the state your business is located, providing a reason for your EIN application.
As the sole owner of your LLC, you’re automatically considered the responsible party, also known as the applicant entity, and are required to list your personal information on your EIN application.
In addition to providing the physical location of your business, you also need to submit the legal name of your LLC, details of formation, Articles of Organization, and answer other questions for federal tax purposes.
After completing your application, you can select to receive your confirmation letter by mail, fax, or online.
After receiving your EIN, you’ll be able to:
Our team of experts can help you start your LLC and apply for an EIN today so you can start your next business venture without complications. Simply provide us with basic information about your business through our formation service and we can file the paperwork on your behalf. With formation plans starting at $0, we help ensure your business is fully compliant so you can focus on growing your dream.
A disregarded entity is required to have an EIN if it has employees, must pay excise taxes, or has any of the other conditions listed earlier. Most banks also require an EIN for opening a business bank account.
By default, single-member LLCs are classified by the IRS as a disregarded entity for federal tax purposes, and so they’re treated like a sole proprietorship unless they elect to be taxed as an S corp or C corp.
As a single-member LLC, you’re not legally required to have an EIN unless you have employees, pay excise taxes, or meet any of the other conditions listed earlier in this article. You can use your SSN to file taxes for your business on your personal income tax report. Because a single-member LLC is a disregarded entity and taxed as a sole proprietorship, the sole owner of the LLC is not considered an employee and therefore does not need to file taxes for their business separately from their personal income.
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