An Employer Identification Number, or EIN, is a string of digits assigned to business entities by the IRS. An EIN functions like a Social Security number for a business. Many, but not all businesses, require an EIN, including LLCs. Whether or not your LLC needs an EIN depends on certain features of the business.
Does your business have employees? If so, you will certainly need an EIN. As the name implies, a primary function of the EIN is to identify and keep track of payroll and other employee-related taxes for businesses. Keep in mind that as the sole member of an LLC, you are not necessarily an employee unless you receive a salary or wages from the company, and neither are contract workers who receive a 1099 instead of a W-2. But, if your single-member LLC has a retirement plan, including a Keogh plan, you will need an EIN.
All multi-member LLCs need an EIN. This is because even if your company does not have employees, you will need an EIN if you've elected to be taxed as a corporation, or if you are taxed as a partnership. A multi-member LLC is taxed as a partnership by default without having to file an entity election. Any time you form a new multi-member LLC under state law, you will need to obtain a new EIN. An LLC being taxed as an S corporation must elect to be taxed as a C corporation and then qualify for S corporation status -- with the result that the company is required to obtain an EIN.
Other Special Circumstances
Does your company pay federal excise taxes or alcohol, tobacco or firearms taxes? If so, this means you will need to get an EIN. According to AccountingAide, as with payroll taxes, the IRS will use the EIN to monitor your payment of these federal taxes. Similarly, if you withhold income other than wages for a non-resident alien, you will have to have an EIN. And, as a general rule, if you are required to withhold wages at all, you will have to file for an EIN.
Single-Member LLCs with Employees
Changes to the tax laws in 2007 that went into effect in 2009 have also changed the way some single-member LLCs report their taxes, in some cases requiring a new EIN. The new regulations require the LLC, not the single-member owner, to pay the employment taxes on employee wages. This means that unless the primary name on the account paying the taxes is the name of the LLC, a new EIN will have to be obtained.
Read More: How to Operate a Business As a Single-Member Limited Liability Company
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