Do I need a new EIN if my entity changes?
As your business expands, you may need to change its entity type. What started as a sole proprietorship may need to evolve into a partnership. Maybe you are planning to incorporate your partnership. Eventually, your company’s profits and growth potential will outweigh the tax advantages of the structure you started with. You may be wondering, “Do I need a new EIN for each business structure change?” Read below to find out when to get an EIN number change.
New EIN for Sole Proprietors
If you’re operating as a sole proprietorship, you’ll need a new EIN if:
- You form a partnership
- You incorporate your company
- You inherit or purchase another business and operate it as the sole proprietor
- You file for bankruptcy
If none of these apply to you, then you don’t need a new EIN.
When Partnerships Need a New EIN
Are you wondering, “When do I need a new EIN for my partnership?” then here are your answers:
- You incorporate your business
- You take over and independently operate your company as a sole proprietorship
- You start a new partnership
If none of these situations are relevant, don’t worry about applying for another EIN.
Corporation EINs
Do you have a corporation? If so, you’re required to get a brand new EIN if any of these situations apply to you:
- You get a new charter from your secretary of state
- You use the parent company’s EIN as a subsidiary
- You become a subsidiary of a parent company
- A statutory merger takes place, creating a new corporation
- You change the structure of your corporation to a partnership or sole proprietorship
If you determine you need a new EIN for your corporation, learn how to get a tax form for an LLC or corporation.
Changing Your Entity
As you can see above, almost every type of business must apply for a new EIN upon changing the entity type. This means that if you are currently a sole proprietor and wish to create a partnership or incorporate, then you will get a new EIN. The same goes for every time that you make this type of change to your business.
There are many actions that you have to take as you change your business entity, so it is best to do so as few times as possible. In many cases, you have to completely dissolve your existing entity in order to create a new one, although some states have a simplified conversion process. Starting as a sole proprietorship and then incorporating or forming a partnership is the easiest move. If you already have a corporation, partnership or LLC, you will find it can be a time-consuming and expensive procedure.
New Liability Requirements
When you change your structure, you also end up affecting your tax liability and your legal liability. Therefore, you always want to discuss the decision with a lawyer to ensure it is the right move for you. This also helps you to know what paperwork you will need to do to minimize the impact on your business.
Growing Businesses
As your business grows, it is inevitable that you want to make some changes to it. Minor changes, such as altering the name or moving to a new location, will have minimal impact on the structure and foundation of your business, including your EIN. However, making a change to the business entity has a significant impact, requiring you to file some important paperwork.
In addition to changing your structure, you will have to get a new EIN. From here, you might also find that you have to alert your bank, creditors and other financial institutions of the change. Some businesses will also have to apply for new business licenses and permits under the new business entity and EIN.
Getting a new EIN is easy when you use GovDocFiling. Just fill out our convenient federal EIN application to get started.