Limited liability corporations form under state laws and do not have separate tax classifications under the Internal Revenue Service. The IRS considers your LLC a taxable entity, which answers the question “do LLCs file tax returns” and means you need a federal tax ID — also known as an Employer Identification Number — to operate legally.
Benefits of an EIN
Obtaining an EIN for an LLC does more than allow you to pay taxes. There are several benefits of LLC for EIN. Business owners can use an EIN on most paperwork in lieu of providing their personal social security number. This is an excellent choice for someone who is concerned about the possibility of identity theft, and many people use this method even if they aren’t legally required to obtain an EIN. An EIN also allows business owners to:
EINs for Partnerships
LLCs aren’t the only type of business entities that require an EIN. If you have a sole proprietorship or a partnership, you may need an EIN as well. The EIN determines which types of bank accounts you can open, how the IRS will tax your profits, which additional tax forms you need to file and how your company will be treated if you become involved in a lawsuit. It is usually best to obtain one instead of wondering “do I need an EIN for my partnership.”
How to Apply for an EIN
Whether you need to apply for an EIN for an LLC or for another type of business entity, you can begin the process right here with GovDocFiling. Start our entity type survey to determine whether you need an Employer Identification Number. While you can also apply in person or via postal mail, filing for your EIN online allows you to get to work faster. Most applicants receive their nine-digit number in a matter of days.
Unlike other types of business entities, a Limited Liability Company (LLC) is created under state statute, and the Internal Revenue Service (IRS) does not have a separate tax classification for LLCs. Instead, the IRS uses other common business classifications, including corporations and partnerships, or an entity that is disregarded as separate from its owner. In all of these cases, the LLC is observed by the IRS as a taxable entity and therefore must obtain what is called an Employer Identification Number (EIN), also called a Federal Tax ID.
Obtaining an EIN for an LLC
There are several steps required to properly form an LLC, including filing articles of incorporation, obtaining a legal company name, as well as applying for an EIN.
In addition to being required by the IRS, an EIN will help you achieve other important business matters, including the following:
EINs also provide a bit of protection against identity theft. For example, disregarded entities, like sole proprietorships, often use social security numbers to handle business transaction and to file tax returns. An EIN can be used in place of a member’s SSN when you obtained an EIN for a LLC.
Don’t think of the EIN application process as an extra, tedious step. Think of it as an opportunity to help grow your business.
There are several ways to apply for an EIN, including online application, or by mail. These days, it’s best to obtain an EIN online, where you can usually get the nine-digit number within a day or two.
Don’t wait to get this important tax ID number. If you’re operating as an LLC, it’s legally required.