Are you starting a new limited liability company (LLC) and need to obtain a tax identification number? Getting an Employer Identification Number (EIN), also known as a federal tax ID number, is an important step in forming your LLC.
This comprehensive guide will walk you through everything you need to know about LLC tax IDs, from why you need one to how to apply. We’ll also provide tips to ensure the process goes smoothly.
A Tax ID Is Essential for Your LLC
An LLC tax identification number is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to identify your business for tax purposes. It’s used to open business bank accounts, apply for business licenses and permits, file tax returns, hire employees, and more.
LLC tax IDs also referred to as an EIN or federal tax ID number. Functions like a Social Security Number for your business. Required if your LLC has employees or multiple members. Optional but recommended for single-member LLCs. Free to apply online in minutes. Without a tax ID, your LLC will face challenges securing financing, working with vendors, hiring staff, and carrying out other critical business functions. Getting an EIN should be one of the first steps you take when forming your company.
When Do You Need a Tax ID Number for an LLC
Once you’ve determined your new or existing LLC needs its own tax ID number, it’s time to apply for your Employer Identification Number (EIN). The process only takes about 15 minutes if you follow these step-by-step instructions to complete the IRS online application. With some basic information about your LLC ready, you’ll breeze through getting your EIN assigned instantly.
Wondering if your new or existing LLC actually needs its own tax ID number? Here are some common scenarios that require an EIN:
- You plan to hire employees. An EIN is required if your LLC will have employees. This includes single or multi-member LLCs.
- You have multiple members. Multi-member LLCs with two or more owners need a tax ID number, even if you don’t have employees.
- You open a business bank account. Banks will require an EIN to open an account in your LLC’s name.
- You operate as a corporation for tax purposes. If you file taxes as an S corporation or C corporation, you’ll need an EIN.
- You withhold taxes on payments. If you need to withhold taxes on payments made to non-US owners or partners, get an EIN.
- You pay employment taxes. An EIN is required if you pay Federal employment taxes like Medicare or Social Security.
As you can see, most LLCs will need their own tax ID number at some point. We recommend applying early on so you have it when the need arises.
A single-member LLC is the only scenario when getting an EIN is optional. The business owner can choose to operate under their Social Security Number instead. However, there are risks to using your SSN for business purposes. Getting your own EIN adds an extra layer of protection and credibility.
How to Get a Tax ID for Your LLC
Now that you’ve decided to get an EIN, let’s cover the application process step-by-step.
The fastest, easiest way to get your LLC tax ID number is to apply online at IRS.gov. Here’s how it works:
Step 1: Gather Information
You’ll need the following information handy to complete the online EIN application:
- LLC’s legal name and any trade names
- Physical business address
- Mailing address (if different)
- LLC’s state and date of formation
- Names, titles, and SSNs/ITINs of all owners/members
Step 2: Visit IRS.gov and Begin Application
Go to IRS.gov and search “apply for an EIN online.” You’ll be walked through a short interview-style application. Make sure to have the above information ready.
Step 3: Select Your LLC Type
You’ll need to indicate that you are applying for an EIN for a limited liability company, not another entity type.
Step 4: Provide Your Personal Info
Supply your name, SSN/ITIN, title, and ownership percentage. For single-member LLCs, there will only be one owner to provide info for.
Step 5: Enter Your Addresses
Supply both the physical and mailing addresses for your LLC. If they are the same, you can indicate that.
Step 6: Describe Your Business Activities
Briefly describe what your LLC does (e.g. consulting, retail, etc.). This helps the IRS classify your business activities.
Step 7: Submit Your Application
After reviewing all the supplied info, submit your completed EIN application!
The entire process usually takes 15 minutes or less. Once submitted, your EIN will be assigned immediately and you can download, save, and print your confirmation letter. It’s that simple!
If you prefer to apply by phone, you can call 800-829-4933 and speak with an IRS representative to complete the process. However, applying online is faster.
6 Tips for Applying for an LLC Tax ID
Applying for an Employer Identification Number (EIN) to get your LLC tax ID is quick and easy, especially when you use the streamlined IRS online application. To ensure the process goes smoothly, follow these 6 tips when obtaining your EIN. Having the right information prepared ahead of time and double checking everything allows you to get your tax ID number instantly without any issues.
Follow these tips to ensure your LLC’s tax ID application goes smoothly:
Apply only once your LLC is officially registered with your state.
- Use your LLC’s exact legal name, including suffix (e.g. My LLC Name, LLC).
- List your SSN, not the EIN you’re applying for.
- Only apply once per day. You can’t submit multiple EIN applications simultaneously.
- Double check information before submitting to avoid processing delays.
- Save confirmation letter from the IRS assigning your new EIN.
With an online application taking just 15 minutes, getting your LLC tax ID number couldn’t be much easier.
How an LLC Tax ID Number Is Used
Once you successfully obtain your EIN, how will you actually use it? Here are some of the key ways your LLC tax ID will be utilized:
- Open a business bank account – Banks require an EIN to open an account for your LLC.
- Apply for business licenses and permits – Many licensing applications will ask for your EIN.
- Pay taxes – File taxes and pay estimated quarterly taxes using your new tax ID.
- Hire employees – If you plan to hire staff, you’ll need to provide an EIN.
- Apply for business loans/financing – Lenders often require an EIN to lend to an LLC.
- Work with vendors/suppliers – Vendors may request your EIN when establishing accounts.
- Claim tax deductions – Use your EIN to claim rightful business deductions.
- Obtain an LLC credit card – Get a card to separate personal and business spending.
In short, your LLC’s EIN serves as its official business identification number both for tax purposes and general business operations.
Tax ID vs. Social Security Number for an LLC
As a single-member LLC, you may be wondering if you should use your Social Security Number instead of getting an EIN. Here are some key differences:
- An EIN creates separation between you and your business for liability purposes.
- Your Social Security Number exposes you to potential identity theft if misused. An EIN offers more protection.
- You can’t hire employees with only an SSN. Getting an EIN is required if you plan to hire staff.
- Most lenders require EINs, not SSNs, to lend money to a small business.
- Suppliers, vendors, and partners may insist on an EIN for your LLC instead of using your personal SSN.
While it is an option, using your SSN instead of getting an EIN for your LLC has risks. Plus, EINs are free and easy to get. We recommend taking a few minutes to obtain your unique tax ID number.
Renewing or Revoking an Existing LLC Tax ID
What if your LLC already has an EIN but you need to make changes to it? Here are some scenarios where that may occur:
Renewing an EIN
LLC tax ID numbers do not expire and never need renewal. The EIN assigned to your business will stay the same going forward.
Updating your EIN
If your LLC’s legal name, address, or ownership structure changes, you can update this information associated with your EIN by filling out IRS Form 8822-B. Most changes won’t require getting a new EIN.
Revoking an EIN
If your LLC goes out of business, you should revoke your EIN by submitting IRS Form 8822-B. This notifies them your EIN is no longer needed.
Getting a new EIN
In rare cases, such as identity theft/fraud related to your existing EIN, you may need to obtain a new one. You’ll have to contact the IRS directly if this occurs.
We hope this guide gave you an easy-to-understand overview of LLC tax identification numbers! As you can see, getting an EIN is important for the success of your new business and involves a quick, painless application process.
Most LLCs should take a few minutes to obtain their own tax ID number as one of the first steps when forming their company. Doing so sets your business up for smoother banking, taxes, hiring, compliance, and operations. Don’t wait until the last minute to get this essential identification number!
Visit the IRS EIN Assistant tool or call 800-829-4933 to receive your tax ID today. Your LLC will operate more smoothly and professionally with its own dedicated EIN!
Frequently Asked Questions
Do you have additional questions? Here are answers to some frequently asked questions:
Do I need an EIN if I’m the sole owner?
Most single-member LLCs should get an EIN, especially if you plan to open a bank account or hire employees. However, it’s not strictly required.
Where do I enter my new EIN on tax forms?
Your LLC’s EIN should be entered on Form SS-4, 1065, Schedule C, and other business-related tax forms you file.
Can I get an EIN if my LLC hasn’t formed yet?
No, you must officially register your LLC with your state before applying for a tax ID number.
Can I use my Social Security Number instead?
Sole proprietors can use an SSN instead of an EIN, but this has risks. We recommend always getting your own EIN.
How long does it take to get an EIN?
Applying online at IRS.gov allows you to receive your EIN immediately after submitting the application.
Do I have to renew an EIN?
No, EINs do not expire. The number assigned will remain your LLC’s permanent identification number.