Setting up an LLC? First off, congratulations – it’s a significant new chapter. As you’re crossing tasks off your start-up checklist, securing an Employer Identification Number must undoubtedly be a priority.
Why? An EIN is your business’s social security number – crucial for tax purposes, hiring staff, and opening a business bank account.
From our years advising entrepreneurs, we understand that navigating governmental bureaucracy can feel like a maze.
hat’s why we’re here to guide you. We’ll simplify the process of obtaining your EIN, so you can get back to what’s really vital – growing your business.
Consider this your navigational beacon leading to your EIN. Let’s dive into the specifics of obtaining your EIN and sidestep all the hurdles along the way.
Brief Overview
- Getting an EIN for an LLC is a streamlined process involving choosing a responsible party, providing accurate information, and awaiting confirmation.
- An EIN and a TIN serve unique identification purposes for businesses and individuals respectively.
- For both single-member and multi-member LLCs, securing an EIN can be efficiently managed through a business formation service.
How to Obtain an Employer Identification Number for Your LLC
To get an EIN for your LLC, you’ll need to visit the IRS’s online EIN application page. Complete the form, providing details like your business address and the responsible party’s valid Taxpayer Identification Number (TIN). After submission, your EIN is typically issued immediately.
For more information on applying for an EIN, here is a practical guide we’ve developed backed by our countless hours helping entrepreneurs navigate this process:
Step 1: Select Your Preferred Application Method
The Internal Revenue Service provides two main avenues you can use to get an EIN: online or by mail. The online application process is quicker and more convenient, so it is always our first choice when we are trying to get an EIN for our customers.
However, According to the IRS website, it’s only available for businesses located in the continental U.S. or its territories. For international applicants wishing to establish a limited liability company, a call at 267-941-1099 is the way to go.
Step 2: Determine the Party Responsible for Handling the Application
The IRS requires every application to have a designated responsible party. Their role is to manage the EIN application and the resulting number. This party can be a natural person or another business entity, but they must have a valid TIN.
We noticed that in most cases, the responsible party is an LLC member or owner.
However, minor exceptions apply for corporations, multi-member LLCs, and other unique scenarios, where complex structures or specialized entities like trusts, estates, or non-profit organizations can be appointed as responsible parties.
Always do your due diligence when determining the responsible party for your EIN applications.
Step 3: Gather All Required Information for the Application
For an EIN application of an LLC, small business owners need to gather:
- Legal name and address of the LLC.
- The responsible party’s name, SSN, or TIN.
- The legal structure of the LLC (e.g., single-member or multi-member LLC).
- The reason for applying.
- How many members your LLC has.
- Information about the LLC’s expected activities, like products or services offered, and the primary location of planned activities.
- Your company’s mailing and physical address.
- The country and state where your entity is located.
Step 4: Wait for Confirmation and Receipt of Your EIN
After you apply for an EIN, the wait begins. Patience is essential here. We discovered that the online service usually outputs your EIN immediately. In this case, once you have received it, ensure you save a copy of your EIN confirmation notice to use in the future for personal tax return purposes.
However, if you applied via mail or a fax service, grit your teeth for a longer haul. For mail submissions, the average wait time is about 4 weeks.
For faxed submissions, it’s faster – approximately 4 business days. In our experience, these timelines may fluctuate depending on the IRS’s workload and the time of the year.
What is an Employer Identification Number?
An EIN, sometimes referred to as a “tax ID number” or “federal tax ID number,” is a special nine-digit number given to your business by the IRS (Internal Revenue Service).
It’s kind of like a social security number but for your business, also known as LLC. This unique ID number is crucial for federal tax filings, applying for business licenses, and more.
Getting an EIN is completely free, and once you have it, it separates your business as its own legal entity.
However, keep in mind that being a single-member LLC or a multi-member LLC, or any business structure for that matter, can influence the type of application process and forms you need for EIN.
EIN vs. TIN
Let’s decipher the difference between an EIN and a TIN. A familiar comparison might help: consider both as different types of ID issued by the government.
Just as a driver’s license and passport serve different functions yet identify you, an EIN and TIN serve different purposes for businesses and individuals respectively.
Employer Identification Number (EIN)
An EIN, as we have already discussed, is assigned by the IRS to identify business entities, and you apply online or via mail for it. With your new EIN number in hand, managing a member LLC or applying for a federal tax return becomes seamless.
After you apply online, be sure to secure your EIN confirmation letter. Always remember, for businesses located in the United States or U.S. territories, applying online is the preferred method.
Taxpayer Identification Number (TIN)
On the other side, according to data on the National Institute of Standards and Technology website, a TIN is a broad term for the numbers the IRS assigns to people and entities for tax purposes.
It can be acquired in the form of a social security number or as an individual TIN (ITIN) when social security numbers aren’t applicable.
Our expert analysis indicates that the line of distinction between an EIN and a TIN often blurs for single-member LLCs, as the sole member can use their SSN or ITIN to file taxes instead of obtaining a new EIN from the IRS.
Reasons Your EIN Application Might Be Denied
In some cases, an EIN application may face rejection. It’s essential to conduct a thorough check of your application to ensure it meets IRS requirements and guidelines. Based on our comprehensive understanding as well as our expert analysis, here are the 5 most common reasons:
Incorrect responsible party: The IRS mandates that each EIN application identifies a response party. This party, whether it be an individual or another business entity, shall have a valid TIN. If the responsible party’s details are incorrect, the application may be denied.
Exceeded IRS limits: Here’s a potential hurdle we’ve noticed: the IRS limits the number of EINs issued to a responsible party through the online application platform to one per day. If you apply for more than one EIN number in one day, your application might get turned down.
Invalid business details: Accuracy is key when getting an EIN for LLC. Information such as the legal name, trade name, number of LLC members involved, taxable gross income, and mailing address need to be precise. Mistakes in these areas can result in application denial.
The application form: Often, applications fail due to issues related to the Form SS-4. These issues could be incomplete information, incorrect fax number, or the lack of an authorized individual as the contact person. When filling out the IRS form, be sure to include all necessary details, from the LLC’s name and objective to precise contact information.
Incorrect method of application: Remember, application methods depend on the LLC’s location. If your business is physically located in the U.S., you can apply for an EIN online. If it’s an international business, you’ll have to call the IRS to receive your LLC’s EIN.
Does a Single-Member LLC Need an EIN Number?
For most single-member LLC, acquiring a Federal Employer Identification Number – or a ‘Tax ID number’ as it’s often called – is unnecessary.
This is because the IRS perceives a sole proprietorship as a disregarded entity, meaning the IRS does not see your business as a separate entity.
Instead, they view it as a part of you, the owner, and, in this case, the LLC’s business activities can be reported as your federal tax returns.
However, there are exceptions. If you, as a sole proprietor, are planning to hire employees or open a business bank account, you’ll need an EIN. Similarly, if you decide later on to elect for S Corporation tax treatment, you will also necessitate an EIN. In circumstances like these, applying for an EIN becomes essential.
One crucial factor to remember is that even if you conduct business under a different business name, your social security number might not suffice as an I.D. number for federal tax purposes.
So, while law schools may not teach it, safeguarding yourself with a Federal Tax ID number even as a single-member LLC could be a prudent step.
What Is the Simplest Way to Obtain an EIN
If you need to hire employees or open a business checking account, business formation services like ZenBusiness can simplify the EIN attainment process.
These services act on behalf of the managing member to complete necessary paperwork, often including EIN obtainment in their packages.
This can streamline the business formation process and potentially result in a quicker EIN turn-around period, typically issued within four business days, depending on the IRS’s capacity.
This pathway to obtaining an EIN for your LLC not only ensures smoother navigation through the bureaucratic labyrinth but also allows you to focus where it matters most, on growing your business.
