Is a single member LLC required to have an EIN?

March 8, 2018 - Posted by: admin - In category:

taxes - No Responses

Not always. Even so, an EIN is often required and usually a good idea.

A federal employer identification number (also known as an EIN or FEIN) is a nine-digit tax ID assigned to a business entity by the IRS.  The easiest and quickest way to obtain an EIN is via the IRS website.

When business entities file tax returns separate from the tax returns of the business owners, an EIN is required (seems pretty straight-forward).  Since an LLC or a corporation does not have a social security number, the EIN is needed as an identification number.  State taxing authorities also use the EIN for their tracking and reporting purposes in many instances.

However, a single member LLC may elect to be taxed as a disregarded entity, which is akin to a sole proprietorship in the view of the IRS.  In this situation, the LLC’s income and expenses are reported as part of the tax return of the LLC owner and an EIN is not required solely to file federal or state income taxes (at least in some states).  Even so, most single-member LLC owners will find that getting an EIN is useful and sometimes required for other reasons.  Such other purposes include opening LLC bank accounts, acquiring business credit cards or obtaining corporate loans and, eventually, hiring employees.  Each of those things will require an EIN.

When forming an LLC in Utah, if parties elect for the “paper” filing method, no EIN is required to form the entity.  But if forming the single member LLC online using the State of Utah website, I believe that an EIN is required.  I have formed scores of LLCs online through the State of Utah website over the years and have always had to input a newly obtained EIN to complete the process online.  I mention this fact here to clarify that although an EIN is not technically required, by the IRS or the State of Utah (if paper filing method is used) for a single-member LLC to be validly formed, the practical reality is that an EIN is needed to do the entity formation online through the state website.

Is there any reason not to get an EIN at the formation of a new single-member LLC?  That is likely a question best answered by an accountant.  I am not aware of any negative results from obtaining an EIN as part of the LLC formation process.  Again, since the EIN is going to be needed sooner or later anyway (in almost all instances), why not just get it at the start and avoid potential issues later?  That is what I do for my clients when forming a single-member LLC and believe that most other attorneys and accountants follow the same course of action.


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