Operating your business as a limited liability company (LLC) gives you several advantages. Namely, the business exists as a separate entity from yourself legally, helping to protect your personal assets from legal or financial business liabilities. In a lot of cases, you need a special tax ID number for your LLC. Called an Employer Identification Number (EIN), this special tax ID is not just for employers. Wondering if your LLC needs a Federal EIN? Curious about how to get an EIN for your LLC? Keep reading to learn more about the process.
Steps to Get a Tax ID (EIN) Number for an LLC :
- Prepare Mandatory Business Information
- Apply for an LLC Tax ID (EIN) Number Online
- Apply for an LLC Tax ID (EIN) Number via Mail or Fax
- How Do I Obtain a Tax ID (EIN) Number for my Limited Liability Company?
- How Long Does it Take to Obtain a Tax ID (EIN) Number for my LLC?
- Why Do I Need a Tax ID (EIN) Number for my Limited Liability Company?
To receive an EIN for a limited liability company, you have to provide a range of details about your business and yourself or the principal owner of the business. Preparing mandatory business owner information before you start the application helps the process to go smoothly. Here is what you need:
Basic Business Details
The EIN application requests routine contact information such as the business’s legal and trade names, physical and mailing addresses, and phone numbers. You also need the responsible party’s name and their tax ID such as the Social Security Number (SSN), Individual Tax Identification Number (ITIN), or Employer Identification Number (EIN).
Employee and Member Information
If you have employees, you need to include the number of employees plus your projected employment tax liability for the year. When you apply for an EIN for an LLC, you have to note the number of LLC members and whether or not your LLC was organized in the United States.
Principal Business Activities
Be prepared to describe your business’s principal activity. Possible categories include construction, real estate, manufacturing, and several others. If you don’t see your industry represented, you can write in your own answer.
Why You Need an EIN
Then, the application process requires you to note why you are applying for an EIN. The reasons LLCs need EINs are outlined below.
On the EIN application, you also have to note the structure of your entity, and you may be surprised that LLC is not one of the options. LLCs are a legal business structure, but from a tax perspective, these entities can fall into a variety of different categories. As a result, this can be the trickiest part of the application for most business owners.
Most one-person LLCs are sole proprietorships so you can simply mark that box if applicable. However, in a lot of cases, LLCs are considered disregarded entities, which means the business is not a separate entity from its owner for income tax purposes. In other words, the IRS disregards the idea that you and your business are separate entities.
If your LLC is a disregarded entity and you’re applying for an EIN so that you can file returns and make payments for employment and excise tax, you should select “other” as your type of entity, and you should type in “disregarded entity” or “disregarded-entity sole proprietorship” if an individual owns the LLC.
If requesting an EIN so that you can file Form 5472 (Information Return of a 25% Foreign-Owned US Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business) or Form 8832 (Entity Classification Election), you should also select other, but in these cases, you should specify “foreign-owned U.S. disregarded entity” and note that you plan to file one of these forms.
You may be requesting an EIN so that you can file Form 8832 (Entity Classification Election) to be classified as a corporation for tax purposes or Form 2553 (Election by a Small Business Corporation) to be classified as an S-corporation. In these cases, you should select “corporation” as your business entity. Then, you should note whether you plan to file Form 1120 (U.S. Corporation Income Tax Return) or Form 1120S (U.S. Income Tax Return for an S Corporation). You can just jot in the numbers of the relevant form.
Applying for an EIN because your single-person LLC is welcoming new members? Then, you should select “partnership” as your business entity. Before making your decision, be sure to learn all about the differences between LLCs and Sole Proprietorships.
Want to get an EIN for your LLC as quickly as possible? Then, you should apply for an LLC tax ID (EIN) number online. With the online option, you don’t have to print out forms, drive to the post office, wait in line, or deal with other time-consuming application hurdles.
If you have a bit more time to work with, you may want to apply for an LLC tax ID (EIN) number via mail or fax. Again, make sure to provide all the details explained above. Unfortunately, missing information can lead to delays in the process. You can only apply over the phone if your business is based in another country.
The process to obtain a tax ID (EIN) number for an LLC is relatively straightforward. Start by gathering information about your LLC. To get help with the process, consider contacting a tax ID obtainment service. They can help with questions about the process or with specifics about which business structure you should select if your LLC is a disregarded entity.
Fill out your application thoroughly and make sure to include your contact details. For example, if faxing in an application, write your fax number on the form.
Typically, mailed applications take four to six weeks to process. Faxed applications can yield an EIN within about four business days. With the online option, as long as you provide all the details explained above, you can often get your number the day you apply.
Your limited liability company needs a tax ID (EIN) number in the following situations:
- You are hiring an employee.
- You’re filing employment or excise tax returns.
- You need an EIN for state reporting purposes.
- Your LLC is a foreign-owned disregarded entity that needs to file Form 5472 (Information Return of a 25% Foreign-Owned US Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business).
- You want to file Form 8832 (Entity Classification Election) so that you can be taxed as a corporation.
- You plan to file Form 2553 (Election by a Small Business Corporation) so the LCC can be taxed as an S-corporation.
- You’re opening a bank account or applying for a loan.
- You are changing the type of organization. For example, going from a sole proprietorship to a partnership.
- You’re starting a retirement fund for your LLC.