One of the many awesome things about entrepreneurs is that they’re dreamers. They have a passion for something, and they go for it. If by chance the first project doesn’t work out or they come up with another great idea, they continue to move forward to create a new business venture. While this is a valuable attribute to have, logistically it can create some confusion.
For example, if you had a previous EIN, can you use it for your new LLC? When do you need a new EIN, and when can you use your old one?
At Incfile, many of our customers have been asking questions about their EIN, so here are some guidelines that may help you with your business, too.
What Is a Business EIN?
An EIN is an Employer Identification Number (also called a Federal Tax Identification Number or Tax ID Number) and is a unique number given to businesses by the Internal Revenue Service (IRS). This is how the IRS identifies you when you pay your taxes or when you fill out W9 forms for employees. As a business owner, you’ll need to apply for an EIN if any of the following qualifications apply to you:
- You have employees working for you
- You own a partnership or corporation
- You file any of the following tax returns: Employment; Excise; Alcohol, Tobacco and Firearms
- You have a Keogh or Solo 401(k) retirement plan
- You want to open a bank account separate from your personal account for your business
Which Business Entities Need an EIN?
- Partnerships: All general partnerships and limited partnerships.
- Multiple-member LLCs: You’ll need an EIN with or without employees.
- Single-member LLCs: An EIN is helpful if you’re planning on hiring employees or want to open a separate bank account for your company.
- LLC taxed as a Corporation: If you want to be treated as an S Corporation for tax purposes, you will need to get an EIN.
- Sole proprietorship with employees: You need to get an EIN if you have employees or plan to hire employees within the next 12 months.
Can I Use My Old EIN for My New Business?
You’ll need to apply for a new EIN if:
- You change your business entity type. For instance, maybe you were a sole proprietor, and you decided to start an LLC to protect your assets.
- You create a subsidiary of your company. This is when you purchase another company, but those companies still remain separate. In this case, you’ll need two separate EINs. (For example, Amazon also owns Zappos, and these companies have distinct EINs.)
- You merge with another company to create a whole new company.
- You operate multiple businesses with different names.
- An existing business is purchased or inherited by an individual who wants to run it as a sole proprietorship.
You do not need a new EIN if:
- You’re an existing partnership that is converting to a partnership LLC.
- You want to change the name of your business, but your business entity and operations will stay the same.
- For instance, maybe Katie runs a bakery called Katie’s Sweet Shop, and now she just wants to sell cupcakes and become Katie’s Cupcake Factory. She’ll need to fill out IRS Form 1120 (which you can find here) when she files her tax return.
- You’re an LLC with an existing EIN, and you want to be taxed as a corporation so that your reported income tax becomes a distribution of the corporation. Usually, LLCs tend to have pass-through taxation, which means that instead of filing a separate business tax return, profits and losses are reported on the individual’s personal tax return. However, you can choose to be taxed as a corporation to save money.
- Let’s look at Katie again from Katie’s Cupcake Factory. Not only does she own the company, but she also does all of the baking, which makes her an employee, too. She receives $40,000 as a “reasonable salary,” and the remaining $50,000 of the business’s profits are passed through to the S Corporation. These profits will be reported as an S Corporation distribution on Katie’s personal income tax return — not as employee salary. This means that Katie won’t need to pay Social Security or Medicare taxes on the distribution amount, which will end up saving her money.
How Do I Get a New EIN?
Business owners can get an EIN by filing IRS Form SS-4, but Infile makes it incredibly easy to apply for an EIN. For just $70, you can fill out our form, and you’ll receive a notification with your EIN usually within one business day. It’s that simple!
Whether you’re in the beginning stages of starting a new company and need help filing the paperwork or are having trouble deciding which entity to choose, Incfile can help you with these important jobs, too. Our experienced team can guide you through this process quickly and easily. Contact us today and we’ll help you to fill out and file all the necessary forms to get you started on your new adventure!