A single-member LLC is only required to have an EIN if it has one or more employees or excise tax liabilities—however, you may still find it beneficial to obtain an EIN for your LLC.
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updated September 1, 2023 · 5min read
The Internal Revenue Service uses an employer identification number (EIN) to identify business entities, and while most limited liability companies (LLCs) will need an EIN, there are some exceptions.
Multimember LLCs are required to use an EIN to file taxes, but sole proprietors and single-member LLCs are not and can use their Social Security numbers instead.
Still, many business owners prefer to use an EIN, even if they're not required. EINs offer an array of tax options and financial advantages.
All multimember LLCs require an EIN, regardless of whether they pay taxes as a partnership or a corporation.
But unless a single-member LLC elects to file taxes as a corporation, the IRS treats it as a disregarded entity. This means that the LLC's income is treated as the owner's income for federal income tax purposes. So if you are the sole proprietor of an LLC, you can pay income taxes on your business through your SSN.
A disregarded entity does not have to use an EIN for any reporting or filings required for income tax purposes. It can use either the owner's SSN or EIN. This is the case even if you have obtained an EIN for your LLC. A disregarded entity is not required to obtain an EIN unless it has:
If you make any changes that result in your LLC not being classified as a disregarded entity, you will need to apply for an EIN. For example, you will need an EIN if you add a member to your LLC and it's no longer a single-member organization.
Assuming your LLC doesn't have employees or excise tax liability, you're free to file taxes with an SSN or EIN. Before committing to one tax ID or the other, consider the pros and cons of each option.
While most businesses file with an EIN, there are a few advantages to paying taxes through an SSN:
EINs are popular thanks to the wide range of benefits they offer:
Even if you're not required to obtain an EIN, your LLC will benefit from one. An EIN will promote the long-term growth of your business. For example, most banks request an EIN if you want to open a bank account or credit card under your LLC name. It also protects your privacy by keeping your SSN out of business matters and allows you to hire employees.
Not all LLCs need an EIN immediately. Some owners run on a small scale tied to their SSN while forming their business plan. This saves time and paperwork if they haven't settled on long-term goals. But once you're ready for these benefits, you can apply for an EIN even though the IRS does not require you to have one.
Applying for an EIN is an easy process with no fees involved. LLCs have two application methods:
Once the IRS sends your EIN, save the documents it's listed on. From here, plan on incorporating it into your future business plans.
Whether you're required to get an EIN or need one for a non-IRS-related reason, applying for an EIN for your LLC is easy and presents financial advantages.
by Siege Media, contributor to LegalZoom
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