Does an LLC need an EIN?

You may have heard that you need an Employer Identification Number, also known as an EIN, in order to file your business taxes if you own a business. The EIN is a nine-digit number used to track your business and functions the same as a federal tax ID number. It may differ from your business’ state tax ID number, however, which is used only for state tax reporting.

Some small business owners choose to form a limited liability company, or an LLC for short, for tax purposes and to protect personal assets. This is because judgments or liabilities against the LLC only affect the business and not the owner’s personal assets. Tax benefits may include owner compensation through profit distribution and business loss pass-through.

You might think you must have an EIN if you form an LLC, but this is not always the case. If you are the only member of your LLC and you have no employees, you do not need to apply for an EIN if you select for the IRS to tax your business as a sole proprietorship; you would just use your Social Security number as your EIN. However, there are special instances where you do need to submit an EIN form for your LLC:

  • Your LLC is taxed as a corporation
  • Your LLC is taxed as a partnership
  • You change ownership or tax structure of the LLC
  • You have employees

A sole proprietorship LLC might go an entire year without much activity, particularly in the beginning. You still may need to file a federal income tax form even though the business has been inactive. LLCs with two or more members must report income and expenses on the Schedule C, which must be filed if the LLC made over $400. Single-member LLCs do not need to file a Schedule C if there was no business activity or expenses. Owners must still file personal tax returns, however. Forming an LLC or applying for an EIN is a simple process, and you can fill out the necessary forms with GovDocFiling.