An Employer Identification Number (EIN) is used by the Internal Revenue Service to identify a business. You may also see this number under the name Federal Taxpayer Identification Number. While most businesses are required to have an EIN, there are a few exceptions to this requirement, such as if the limited liability company (LLC) is a single-member LLC.
How do I get an EIN for my LLC? Limited liability company (LLC) owners can obtain an EIN (Employer Identification Number) fairly easily through the Internal Revenue Service (IRS) via the Internet, mail, telephone or fax. In this article, you can find out if an LLC requires an EIN and how you can obtain one.
What Does an EIN Represent?
Once you’ve finally handled the formal registration of your company, there are still several issues you should take care of. Thus, most LLCs need a counterpart to the Social Security Number to operate normally. This 9-digit code is most often known as the Employer Identification Number (EIN). You can also meet alternative names and abbreviations such as Taxpayer Identification Number (TIN) or Federal Employer Identification Number (FEIN).
The primary role of an FEIN lies in identifying the venture. The IRS gives it to facilitate the procedure of finding your firm’s tax records in the database. Nevertheless, this code is not only for managerial and tax goals. There are other organizations, which might ask you to provide it.
Even if the legislation does not obligate you to attain an EIN, it provides access to a wide range of significant advantages for any enterprise. These include:
- The ability to hire employees: Once you have a TIN, you can simplify the work of your firm by distributing responsibilities among your employees. This way you relieve yourself and are able to focus more on planning. This code will allow you to register for payroll tax, and it will contribute to the proper maintenance of the company’s payroll. Moreover, a TIN makes it possible for the IRS to see that you withhold payroll taxes correctly. Even if you don’t initially intend to hire anyone, such a need may arise as the entity grows;
- Tax reporting: For everything related to taxes, an FEIN acts as an ID as it is how the IRS identifies your company. Any LLCs with two or more members and firms hiring employees need this number to complete and file their annual tax forms;
- Opening a commercial bank account: The personal liability shield effect that an LLC provides to its owners is based on the segregation of personal and corporate assets. Otherwise, the entity may resemble a partnership too much. If the court has such doubts, it has the right to revoke the limited liability, which puts the owners at risk. Furthermore, having a separate account will protect your funds in case your personal accounts are attacked by criminals. To avoid such situations, you should think about setting up a business one. This way, you can use a credit card and financial services designed specifically for your industry, as well as streamline bookkeeping. The list of documents needed to create a corporate account depends on the particular bank, but an EIN is generally required;
- Financial empowerment: LLCs often have difficulties attracting investments from the private sector, which increases the value of bank loans. While not all banks require a TIN, the majority will still ask for one. Bank employees can use it to check the credit history of your venture. Having good statistics enhances your chances of getting a loan and can also contribute to better credit terms. Thus, by receiving an EIN, you can significantly speed up the development of your firm;
- Maintaining privacy: Even though the law says you can use your Social Security Number (SSN) instead of your TIN, getting the latter lowers the risk of identity theft.
Do LLCs Need EINs?
Acquiring a TIN is not a compulsory step in incorporating a venture as not all entities need one. If you are a single owner of an organization, the legislation does not require it, with some exceptions.
If not otherwise specified by the owner when starting a firm, an LLC is assigned “pass-through” taxable unit status. The IRS treats such an enterprise as a disregarded entity, exempting it from the obligation to provide a separate corporate tax return. Instead, the owner declares the profits and losses of the company by filing a regular personal tax return. Due to this, LLCs that are taxed as sole proprietorships may not get a TIN. In this case, its functions will be performed by the owner’s Social Security Number (SSN). Take into account that this does not apply to organizations hiring employees or having any federal excise tax liability.
Besides, even if you are the sole owner of an enterprise, it may be advisable to apply for an FEIN as long as you plan to engage another participant. The same goes for ventures having any kind of pension plan and those with owners choosing to change their tax regime. If you intend to move from “flow-through” tax treatment to a C-corporation or an S-corporation type, you will need to have a TIN.
As for LLCs with more than two owners, the regulations governing them are unambiguous. Regardless of whether there are employees or how taxes are paid, a venture should obtain an FEIN since it is imperative for tax purposes.
Although there is no law requiring it, even single-member entity owners working at home are more likely to acquire a TIN in addition to their SSN. If you prefer the electronic form, the filing process will only take a few minutes. You will greatly enhance your company’s opportunities this way and also save your time in the future.
Are you still in doubt whether you need an FEIN? One of the biggest benefits of an LLC is the ability to enjoy limited liability protection, which will prevent creditors from claiming your personal property. To maintain it, the firm needs a special bank account, for which you’ll have to get an EIN. In addition, your TIN may be requested by federal, state, or local authorities, as well as the IRS.
How To Obtain a TIN?
If you are going to get this code, please note that it is better to do it after opening an enterprise. Of course, you are free to apply without waiting for the official decision to open an LLC, but this rush can cause some trouble. If the state rejects your application to start a venture due to a mistake or a name match with an already registered company, you’ll have to do everything all over again.
Fortunately, the filing process is very simple and completely free. To fill out Form SS-4, you’ll need to prepare basic info like the reason for receiving it, type of activity, Social Security Numbers of the members, etc.
Depending on how quickly you want to start using your TIN, you can file Form SS-4 in one of the following 3 ways:
- Online: If you need it right now, use the convenient service on the IRS website. You can do this only during regular office hours, but you’ll get the paper you need in just a couple of minutes, once the check has been done;
- By fax: By downloading and filling out Form SS-4, you can fax it. If your office is located in one of the 50 states or the District of Columbia, then contact (855) 641-6935. In the event you do not have a legal residence or a registered office within the USA, fax it to (855) 215-1627. This option guarantees issuance of the code in four working days;
- By mail: The IRS also accepts mail-in applications. The completed form should be sent to:
|Internal Revenue Service
Attn: EIN International Operation
Cincinnati, OH 45999.
This is the slowest method as it takes about five weeks to get an answer.