An Employer Identification Number, or EIN, is crucial for business owners preparing to launch an LLC. There is, however, some confusion around when an EIN is required and what exactly it does, so we're here to clear things up. Find out if your single-member LLC needs an EIN, how to apply for one, and why you might want an EIN even if it's not required.
EINs and Single-Member LLCs
With EINS, you first need to determine what type of LLC you have and how it’s taxed. A single-member LLC is a business operated by just one owner, rather than multiple members or partners. It's similar to a sole proprietorship in this way, but the difference is that an LLC is a legal business entity with all the benefits of that designation.
Single-member LLCs can choose how they’re taxed, but most often, they're considered disregarded entities. This means the IRS views them similarly to sole proprietorships, making them subject to pass-through taxation (in which the owner’s profits are claimed as income on their personal tax return).
This flexibility is what makes LLCs such an appealing choice for business structures, but it can also lead to some confusion — especially for owners who aren’t sure if they need an EIN.
EINs or SSNs for Your LLC
Wondering if you need an EIN or SSN for a single-member LLC? The answer could be either, depending on the circumstances. Single-member LLCs that do not have employees are considered disregarded entities and are free to operate without an EIN. In this case, the business owner’s Social Security number is required for tax filing purposes.
There are, however, benefits to using an EIN instead of an SSN, even if it isn’t required for your business.
Why opt for an EIN if you don’t need it?
Using an EIN identifies your business but not you personally as the owner. If you use an SSN, it’s much easier to find your private information. An EIN protects your privacy and deters identity theft and fraud.
Even if you don’t have employees right now, there may come a time when you need to hire in order to grow your business. Having an EIN now will ensure you’re ready to find and hire the talent and the support you need in the years to come.
You’ll have much more success building your business finances with an EIN. Having an EIN can make it easier to open a business bank account, raise your business credit score, and seek out funding and loans.
Simply put, an EIN is a best business practice. Secure yours now to ensure smoother business processes in the future.
Why Does My LLC Need an EIN?
EINs offer many benefits, including:
Privacy Protection ✔︎
Fraud Prevention ✔︎
Ability to Hire Employees ✔︎
Ease of Opening Business Account ✔︎
Help Building Business Credit ✔︎
Increased Chance of Loan Approval ✔︎
EIN Requirements for a Single-Member LLC
Like a Social Security number, an EIN is a unique nine-digit number that identifies your business to the government, specifically the IRS. And while it has "employer" in the name, you don't necessarily have to have employees in order to need or want an EIN.
So, which LLCs do require an EIN?
All multi-member LLCs are required to have an EIN, but the rules can get a little fuzzy when it comes to single-member LLCs. There are, however, a few instances in which a single-member LLC must secure an EIN, including:
Hiring one or more employees and paying payroll taxes
Choosing to be taxed as a corporation and not as a disregarded entity
Being subject to excise taxes (taxes imposed when certain items are sold, like tobacco, fuel, or tanning equipment)
Being required by the bank to open an account in the business’s name
Keep in mind that multi-member LLCs always require an EIN, so it's a good idea to plan ahead and secure one now if you’re thinking of bringing on a business partner.
Does My Business Need an EIN?
Good to Have
Single-Member LLC No Employees
Single-Member LLC With Employees
Single-Member LLC Filing Taxes as Corporation
Single-Member LLC With Excise Tax Liabilities
How to Get an EIN for Your Single-Member LLC
Ready to file an EIN for your business? Here are all the steps you need to take:
Form Your LLC
You’ll need to form your single-member LLC if you haven't already. An LLC comes with a wealth of benefits for business owners, and it’s a perfect choice for anyone looking for flexibility and cost-effectiveness.
You can form an LLC on your own or use a trusted business formation partner like Incfile. We offer $0 + state fee LLC formation to get you started at the right price.
Gather Your Information
You’ll need key business information to secure your EIN. Make sure you have your Articles of Organization handy, along with your personal information, the business’s registered name, and, in the case of multi-member LLCs, the names and addresses of all business members.
Understand the Rules of Online Application Through the IRS
You can apply online directly with the IRS when you’re ready to obtain your EIN. It helps if you’re familiar with the IRS website and the guidelines for EIN application, including the following:
Your business must be based in the U.S. or in a U.S. territory in order to apply online.
You can only obtain an EIN during the IRS's operating hours, which are Monday-Friday between 7 a.m. and 10 p.m. ET.
You must have an existing taxpayer identification number, whether it's an SSN, ITIN, or previous EIN.
If there’s a hiccup in the application process, you must wait until the next day to apply again.
If you’re applying for EINs for multiple businesses, you can only obtain one per day as the sole owner.
If you've previously obtained an EIN online for the same business, you cannot obtain a new one.
Set Aside a Time for Application
While applying for an EIN through the IRS website isn't difficult, you’ll need to make sure you have plenty of time dedicated to focusing on the process. That’s because EIN applications must be completed in a single session in order to be processed, and the session will time out after 15 minutes of inactivity.
Alternatively, Apply by Mail or Fax
If you prefer not to file online, you can submit your application by mail or fax to the IRS. Here's how:
Internal Revenue Service
ATTN: EIN Operation
Cincinnati, OH 45999
Or Use an EIN Service
All of this can be a hassle for busy business owners, especially those who aren’t easily available during regular U.S. business hours or don’t have a block of time to dedicate to the application process.
If this is the case for you, consider using an EIN filing service. Simply pay the service provider a fee and they'll quickly secure an EIN for you.
Incile’s EIN service will have your EIN waiting for you within a day, stored in your customer dashboard for easy access. This simplifies the process and gives you a centralized place to keep and access all of your important business documents.
FAQs About Single-Member LLC EINs
Here are some of the most-asked questions about EINs and single-member LLCs:
Does a Single-Member LLC Need an EIN to Open a Bank Account?
A single-member LLC might need an EIN to open a bank account, but it varies based on the financial institution. It’s not uncommon for a bank to request an EIN when setting up a business account, especially if it’s being set up under the business’s name. However, it’s better to acquire an EIN before you start shopping around banks so you’ll be ready no matter what the requirements are.
Should I Get an EIN as a Sole Proprietor or LLC?
A sole proprietor rarely needs an EIN, but it can be very helpful for an LLC. If you’re planning to hire employees, an EIN will be mandatory. It will also be needed if you choose to tax your LLC as a corporation and not as a disregarded entity.
What Is the Difference Between an LLC and an EIN?
An LLC and an EIN are not the same thing. An LLC is a legal business structure, while an EIN is a unique number used to identify your business to the IRS. Some businesses, like single-member LLCs, disregarded entities, and sole proprietorships can operate without an EIN. But in some cases, obtaining one is still a requirement (see above). An EIN is a good asset to have for your business, whether you’re planning to hire employees or not.
Is a Single-Member LLC the Same as a Sole Proprietor?
A single-member LLC is not the same as a sole proprietor or sole proprietorship. An LLC, whether single-member or multi-member, is a legally formed business entity that provides liability protection for the owner or owners’ personal assets. A sole proprietor is a single business owner who operates a sole proprietorship — a business that has no legal structure.
While many business owners begin as sole proprietors, most find that they prefer to form a legal structure to take advantage of the benefits, including limited liability.
Do I Need an EIN for an LLC With No Employees?
You may need an EIN for an LLC with no employees, so it’s always best to check directly with a business formation expert or tax professional. Even if you have no employees, your LLC might need an EIN to apply for loans, open a business bank account, or change your tax designation.
Get Your EIN in Less Than 24 Hours
It isn’t always black and white when you’re wondering if you need an EIN as a single-member LLC owner, but it’s better to be safe than sorry by securing an EIN for any future circumstances. Request your EIN through Incfile, and you’ll have it ready to go and waiting in your dashboard within 24 hours.
Wendi is a freelance writer based in Indianapolis, IN, with over a decade of experience writing for a variety of industries from healthcare to manufacturing to nonprofit. When she isn't working on solutions for her clients, she can be found spending time with her kids and husband, working in the garden or doing more writing (of the fiction variety).