The simple answer to this question is that the number EINs you are allowed is directly proportional to the number of business entities you have. A single business or entity can have only one, although there are scenarios where you will need to apply for a new one due to changes to your business.
This also depends on how your business operates. If your business is a single entity with different divisions, it does not require each division to have its own EIN. One EIN can be used for the entire entity. An EIN, or Employer Identification Number, is simply a nine-digit number that functions as your tax identification number. While your company can only have one EIN, there are rare occasions where you will need to change or get additional EIN.
In most cases, you will only need one EIN number for your company. The EIN is a bit like a social security for your company. Once an EIN is assigned, it will remain with your company even if you choose to shut your company’s proverbial doors.
Later, if you decide to re-open business, you will still find your company associated with that EIN in the eyes of the federal government. However, the one primary case where an EIN can be touched or changed is when the entity of your company is altered. There are four major business entities in the United States; sole proprietorships, partnerships, limited liability companies and corporations.
If you are going from sole proprietorship to partnership, for instance, you will need to acquire a new EIN number. The newly assigned EIN will now serve as the Tax ID for your company, so you still will not have more than one valid tax identification number.
But have it in mind that it is not possible to use the same EIN for different entity types or for businesses that are not related, for instance if you have multiple businesses that are taxed differently, such as a corporation and an LLC.
This is because these types of businesses fall under different tax rules and they require separate EINs. Although every state and some localities have different rules for acquiring new EINs, check with your state and local business agencies for details about licenses, permits, and tax registrations.
Business owners are advised to carefully consider how their business is operated. The best choice may be to operate it as a single entity if managing multiple, separate entities would be too costly or complicated. Other issues like taxes, the type of entity and ownership issues should also be analysed extensively before making a decision. Depending on the business owner’s situation, it may also be imperative to separate the business into different entities.
In this case, it would be necessary to apply for another or multiple EINs. It is also important to note that if a business changes ownership or the structure of the business is reorganized, the owner may be required to apply for a new EIN.
How to Use a Previous EIN Number for a New Business
Just like it was explained above, you will have to apply to the IRS for a new Employer Identification Number for any new business. However, under some conditions, you can use a previous EIN, such as for a limited liability company or a partnership.
Note that reusing an EIN requires you to determine in what cases the number can be reused, then properly inform the IRS of its reuse for a new business. Nonetheless, here are steps to consider.
Analyse your Situation
First and foremost, you will have to ascertain whether you can reuse your old EIN for a new business. In the United States, IRS rules state that you do not need a new EIN when you change the name of a partnership or add locations; form a new partnership as a result of the termination of a partnership; transfer 50 percent of a partnership to new hands; convert a partnership to a limited liability company or LLC; change the LLC name or location; or form a new LLC with one owner and choose not to tax it as a corporation or S corporation.
However, these rules can be quite complex for making these determinations, so consult the IRS website (irs.gov) or a tax attorney for specific rules on making this determination.
Inform the IRS
Have it in mind that you will have to inform the IRS before making any major business adjustments.
- As a Sole Proprietorship: You will be expected to write to the address where you file your return. A representative of the business will be expected to sign the letter. Include your EIN number on the letter.
- As a Partnership: You will be expected to fill out form 1065 for the current year if you are a partnership. Mark the “name change” box on page 1, line G, box 3. Write a letter to the IRS informing the agency of the change if you have already filed a return for the current year. A partner in your firm must sign the form.
- As a Corporation: You will have to Fill out Form 1120, and mark line E, box 3 on page 1 if you are a corporation. Fill out form 1120S, and mark line H, box 2 on page 1 if you are an S corporation. If you have already filed your return for the current year, write to the IRS at the address where you file your return and inform the agency of your new business. Include your EIN number and have a corporate officer sign the letter.
- As a LLC: Write to the IRS at the address where you filed your tax return if you are a LLC operating as a sole proprietor. Follow the procedure for a sole proprietor described above if you have already filed your taxes for the year. If you are an LLC operating as a partnership, fill out Form 1065, and mark line G, box 3 on page 1.
Additionally, mark the appropriate box on page 2, “Schedule B,” and either mark line C, “Domestic limited liability Company” or line D, “Domestic limited liability partnership.” Send a letter to the IRS if you have already filed your tax return for the year, include your old EIN, and have a partner in the business sign the letter.
Just as there is no limit to the number of separate businesses an individual or entity can own, there is also no limit to the number of EINs an individual or business can apply for, so long as each new EIN is for a separate and distinct entity. If your business is just a division of a single entity, you would not need separate EINs for each division.
Howbeit, a detailed analysis of your situation should address numerous issues including the costs associated with forming and maintaining multiple entities, risk tolerance and/or the desire/need to insulate the assets of one business from the liabilities of another, Federal and state taxes, ownership (i.e. are you the only owner of each business or are there others involved in some or all) and choice of entity.