Do you need an EIN?


This is a typical question we hear when an entrepreneur is starting a business. Like many times when we are dealing with tax law, the answer to the question is “It depends”. One type of entity that usually does not require an EIN is a single member (one owner) LLC.

When a single owner LLC is formed, we recommend that a separate bank account be opened, to separate the personal and business activities. However, many times the bank will insist that the single owner LLC have an EIN tax ID number (Employer Identification Number) before the bank will let them open the account.

When you form an LLC, you can choose to be taxed as a sole proprietor, S corporation, or C corporation. The default tax treatment, if you do not choose how you want your single member LLC be taxed is a sole proprietorship (aka disregarded entity). As a general rule, your disregarded entity can use your own social security number as the tax ID number for your company. However, do not be surprised when your bank representative say “This company needs an EIN”. Be patient since they don’t understand this concept of disregarded entity. If you want to obtain an EIN for your single member LLC, when it is not required, it is up to you.

The bottom-line is, if you qualify you do not have to have a separate EIN for the single member LLC. There are some exception to the general rule above. For example, if you have employees or you chose to be taxed as a corporation you must have an EIN. If you need further assistance, you can contact my office. Also, the IRS has a simple questionnaire that can help you determine if you must have an EIN.

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