A Complete Guide to Understanding EINs for LLCs


A Complete Guide to Understanding EINs for LLCs

Table of Contents

business owner holding Open sign in front of door

Once you’ve formed your LLC, it’s often a good idea to obtain an Employer Identification Number (EIN). Getting an EIN is an important step in making your business official with tax authorities, banks and other organizations. 

The U.S. is seeing a large increase in the number of new business owners applying for EINs. According to recent data from FRED economic data, more than 100,000 businesses a week are applying for EINs, which is a big increase over the last couple of years.

There are several good reasons for why you should get an EIN for your LLC or other business entity. Discover how to obtain one and how this identification number can help your business grow.

Incfile | EIN

Why Do I Need an Employer Identification Number to Start a Business?

Getting an EIN helps to make your business official, creating a unique Taxpayer ID number with the IRS and making it easier to apply for bank accounts, loans and similar facilities. Think of your Employer Identification Number as a Social Security number for your company.

Your business EIN helps make your business more “real” and legitimate as a legal and financial entity. The IRS, Social Security Administration, banks, credit issuers, financial businesses, government agencies, state bodies and others all use EINs.

Having an EIN is often necessary for several critical business activities: 

If you are operating as a sole proprietor and have not yet set up an LLC, you might be missing out on thousands of dollars per year in tax savings without an EIN.

Getting an EIN can also help provide you with the peace of mind that comes from doing business in an “official” and more efficient way.

when does an LLC need an EIN

Does Every LLC Need an EIN?

All multi-member LLCs or LLCs taxed as corporations must have EINs. Single-member LLCs that employ others must also have EINs. Additionally, your state or bank may require any type of LLC to have an EIN.

Does a Single-Member LLC Need an EIN? 

The IRS does not require single-member LLCs to have an EIN unless they employ others. However, your state’s Department of Revenue, your bank or others may require an EIN, so it’s always a good idea to get one. 

Do I Get an EIN Before or After My LLC Formation?

You will need to form an LLC or other legal business entity for your business before you apply for your Employer ID Number. Start your business first, then get your EIN. 

There needs to be an actual “business” that exists in legal form in order to qualify for a tax ID number for that business.

Incfile offers a $0 + state fee LLC formation package. Our service will do all the work for you and get you set up with a new business entity fast. Once your company is created, we can also assist you with getting an EIN.

What Is the Difference Between the EIN and Tax ID?

The EIN is a tax ID, but for a business instead of an individual. A Social Security number (SSN) is a taxpayer ID for an individual person. You are probably used to seeing your SSN on the top of your tax returns and when opening a bank account or dealing with other financial matters. An Employer ID Number (EIN) is the same type of number, but for a business entity instead of an individual person.

Many of the same reasons why you need a Social Security number (filing taxes, opening bank accounts, confirming identity, etc.) are the same reasons why your business needs an EIN.

Does My LLC Need an EIN to Open a Bank Account?

You will often need an EIN to open a separate bank account for your business, and a business bank account is a requirement for LLCs and corporations. The bank will also typically want to see your Articles of Organization or Articles of Incorporation for your business.

Having an EIN is proof to the bank that your business exists as a legal entity, that you have completed the required paperwork with state and federal authorities and that you are ready to do business and make money as a business.

What If I Need to Change My EIN?

Most businesses get an EIN assigned to them when the business is created — when the LLC is formed or when the corporation is incorporated. But, sometimes, your business situation will change and you might need to change your EIN too.

Here are some situations where you might need to apply for a new EIN:

  • Buying an existing business
  • Converting your business to a different type of business entity (such as switching from LLC to corporation or vice versa)
  • An estate takes over ownership of a business after the death of an owner

Can the IRS Cancel My EIN Number?

According to the IRS website, the IRS cannot cancel your EIN. Every EIN is created and assigned as a unique permanent identifier for the business entity to which it is assigned. Even if the business entity never files a tax return or even if the business closes, the EIN will not be canceled, reused or reassigned to any other business.

If you decide that you no longer need or want your EIN, you can write to the IRS to close your business account. This can be done along with other aspects of closing a business.

Applying for an Employer Identification Number

The IRS website has an online application process with detailed guidance to apply for an EIN online. You will need to fill out IRS Form SS-4 and provide some details about your business, such as the type of business entity, reasons for applying for an EIN, how many employees you expect to have within the next 12 months and more.

If you want help navigating this process, Incfile offers a fast, easy service to help you file for your Federal Employer ID Number for an affordable fee. This service can save you time by taking care of the filing and paperwork for you. If you decide to incorporate your new LLC using Incfile, our Gold and Platinum packages include an EIN with the service.

Please note: This post contains affiliate links and we may receive a commission if you make a purchase using these links.

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