Limited Liability Companies (LLC) are popular business structures because they offer personal liability protection for members and don’t have all the formalities that corporations do. LLCs also enjoy pass-through taxation, which means the company doesn’t pay federal income taxes; instead, taxes are paid through members on their personal income tax return.
LLCs are organized on a state-by-state basis, and typically through the Secretary of State in the state where you plan to do business. LLCs have startup and annual fees that must be paid, and those fees vary widely depending on where the LLC is registered.
There are different kinds of LLCs with respect to the number of members it has, and how the business is managed. The following are different kinds of LLC formations:
The type of LLC you establish is set up in the LLC’s organizing agreement, or articles of organization, with the Secretary of State and can be changed at any time.
How to Obtain a Tax ID Number for an LLC
Regardless of type, most LLCs will need a tax ID number, commonly called an Employer Identification number, or EIN for short.
Selecting the right entity for an EIN is easy when you decide to go with an LLC because it’s almost guaranteed that you’ll need one.
EINs allow LLCs to open bank accounts in the name of the business, acquire credit, and apply for state or local permits. An EIN also lets an LLC hire employees and establish a payroll.
Single member LLCs without employees are an exception to this rule; but it’s still a good idea to obtain an EIN, even if you’re unsure about what type of LLC you’ve established, or if you’re not sure you’ve made the right choice.