No, you will have to form an LLC or another legal business entity before you apply for your Employer ID Number. This is because the government will not provide you with an EIN until you have established an official legal business entity that can be provided with an EIN. Also, note that the IRS will request for your business formation date and legal business name on the EIN application.
In the United States, you will be expected to register your business and get approval for the business name from your state before applying for an EIN. You can’t be so certain of your business name until it’s approved by your state. And if you choose to get an EIN first, and your LLC name is rejected, then you will have to cancel the EIN, re-file your LLC formation documents, wait for LLC approval, and then apply for a new EIN.
An Employer Identification Number functions as a tax ID number for your business and can also be referred to as a Social Security number for your company. Just the same way U.S. taxpayers have a Social Security number (SSN) that makes them a “real person” in the eyes of the IRS, your business EIN helps make your business “real” and legitimate to the Social Security Administration, banks, credit issuers and other parts of the financial and government regulatory systems.
Since the IRS doesn’t actually consider LLCs as their own business entity type, the owners have to choose a tax designation. If they choose to be treated as a corporation or a partnership, they will have to obtain an EIN. Disregarded entities usually aren’t required to get EINs. Before 2009, single-member LLCs were allowed to just use the SSN of the owner as their EIN when it came to filing taxes, but now they have to use an EIN.
Normally, home-based companies, with one person working in numerous capacities may also not need to obtain an EIN, since the IRS can view them as a sole proprietorship. The owner’s social security number (SSN) can be used as the company’s EIN if it’s acting as a sole proprietorship. Most often, owners of this type of entity might not want to use their SSN in this capacity, so they can decide to get an EIN instead, even though it’s not mandatory.
In addition, any time an LLC hires employees, it is expected to have an EIN. Anytime an LLC alters the structure of their ownership, they might also need to file for an EIN. If for any reason, a single-member LLC adds a second member, they will have to alter their tax classification and also get a new EIN. If the owner of an LLC sells their business, the new owner will be expected to get a new EIN for the company.
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How to Obtain an EIN for Your LLC
According to reports, the fastest and easiest way to obtain a federal tax ID number for a limited liability company (LLC) is to apply online at the Internal Revenue Service website. Note that if you apply online, you will get your tax ID number almost immediately after submitting your application. Note that you can also apply for a tax ID number by fax or mail. Here are basic steps to follow.
Decide if your LLC needs a tax ID number
Just like it was explained above, the federal tax ID number, also referred to as a Federal Employer Identification Number, FEIN, or EIN, is a number that identifies your business for certain tax purposes. It is more or less the business version of a Social Security number.
Note that a good number of LLCs are expected to have an EIN—you won’t even be able to open a bank account without it. However, if you own a single-member LLC with no employees, you may be able to leverage your Social Security number instead. Nevertheless, in the United States, you are expected to have an EIN if any of the following are true:
- You have employees.
- Your LLC has more than one owner.
- You file employment; excise; or alcohol, firearms, and tobacco taxes.
- You withhold income taxes on wages paid to non-resident aliens.
- You have a Keogh plan.
- You are involved with certain types of organizations, such as certain trusts, estates, real estate mortgage investments, and nonprofits.
Form Your LLC
Have it in mind that your LLC doesn’t legally exist in the United States unless you file the formation paperwork and it has been approved by your state. Just like it was stated above, wait until you receive confirmation that your LLC has been officially formed before you apply for an EIN.
Organize All Required Information
Normally, the IRS won’t request for enormous and detailed information in its tax ID number application, but there are certain facts you are expected to have handy when looking to apply for your EIN, and they include:
- The official name of your LLC, as shown on the paperwork you received from the state
- The LLC’s mailing address
- The name and Social Security number of the “responsible party”
- The number of members the LLC has
- The date you started the LLC
- The application will also request that you specify the number of employees you intend to have within the next 12 months.
Fill out the federal tax ID number application
Indeed, the IRS prefers that you apply for a tax ID online. Have it in mind that this application route can be used by any business whose main place of business or legal residence is in the United States. If you apply online, note that you will get your tax ID number immediately. If you are applying for EINs for more than one LLC, have it in mind that the IRS limits applications to one per responsible party, per day.
If you can’t or prefer not to go through the online application route, then you can consider applying or filling out an Application for Employer Identification Number (Form SS-4), then fax or mail it to the IRS.
Note there are two primary reasons to wait until your limited liability company is formed before acquiring an Employer Identification Number. First, it is crucial to verify that the name of your business was properly registered and not rejected. Second, when applying for an Employer Identification Number, the IRS will want to see the exact legal name that was approved and the date that the business was formed. However, an EIN for an LLC can be granted online quite easily. Business owners are advised to start by researching the terminology associated with an EIN to become more familiar with the process.