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Do You Need an EIN for An LLC Without Employees?

An EIN or employer identification number, also known as taxpayer ID or tax ID, is needed for most business organizations.

As the name implies, your EIN serves as an identity for your business when it comes to filing taxes or performing your tax obligations.

Do You Need an EIN for An LLC Without Employees?

Having an EIN varies whether someone is working with you or not. Here’s a complete guide every business entrepreneur needs to understand about EIN, why you need one, and the benefits it offers.

Do You Need An EIN If You’re Self Employed?

An EIN or tax identification number is not needed for a sole proprietorship or if you’re an LLC without employees. In most cases, you’ll be using your SSN as your tax ID number.

However, you are required to get an EIN if you’re a single-member LLC that excises tax returns or files pension. Even if your business entity is a partnership without a partner employee, you must obtain a tax ID.

There are specific cases that you will be required to get a new tax ID or EIN from the IRS. You can check for irs ein number application requirements and qualifications to easily file your form and obtain your EIN on time.

Here’s how to know if you’re a good candidate and required to get one:

  • If you’re a business entity that transitions from a single proprietorship into a partnership or corporation.
  • If you’re a business entity that transitions from a partnership into a sole proprietorship or corporation.
  • If you’ve had an existing business entity (inheritance or purchased) from someone planning to run the business entity as a single proprietorship.
  • If you’re a business entity that transitions from being a corporation into a sole proprietorship or partnership.
  • If the owner dies and the business has been taken over or dealt with by the current state.

Note: LLCs must be registered and approved officially before they can get their EIN.

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Benefits of having an EIN:

  • Single-member LLCs that have employees/excises tax liability are required to obtain an EIN.
  • Single-member LLCs without employees/excise tax liability doesn’t need to get an EIN.

However, it is highly recommended to obtain an EIN regardless of if you’re not required to have one due to several benefits that can affect your business’s growth in the future.

  • EIN serves as another layer of protection for your business.
  • If you plan to hire employees in the future, you’ll still need to get an EIN. This will save you time as you already have your EIN ready whenever required.
  • It builds credibility, and most banks need an EIN for you to open a banking account for business. This is another option to secure and separate your professional and personal finances.
  • Having an EIN to substitute using your SSN reduces your risk of getting exposed to malicious acts and identity theft.
  • Credit and lending agencies track business credits through EIN.
  • While it’s not a requirement for business loans, most lenders require companies or businesses that provide proof of establishment through lines and accounts associated with the business EIN.

What Is The Difference Between A FEIN and EIN?

There is no difference between a FEIN (Federal Employer Identification Number) and EIN (Employer Identification Number). FEIN is also known as your Federal tax ID number.

As for TIn, they are the same too; both are nine-digit figures given by the IRS for every business entity.

Obtaining an EIN is conveniently accessible, and there are various ways to meet your distinctive needs. You submit an application form for tax ID via fax, online, telephone, or mail. However, the best and most convenient way to save time and effort is through an online application.

By default, single-member LLCs are treated by the IRS as sole proprietorship entities. However, you are not required to get an EIN, as we’ve mentioned above, unless you need to file an excise tax return or you’ll have employees. Using your Social Security Number is the best way to file your tax obligations.

Furthermore, most sole proprietorship owners still prefer having an EIN to separate their professional finances over their personal finances for total security.

Conclusion

Several essential factors affect business entrepreneurs and the owner’s decision to obtain an EIN outside the federal tax deliberation.

For instance, most banks require having EIN when opening bank accounts associated with your business.

If you plan to venture on a higher ground sooner, most businesses who will want to work with you require credibility, and an EIN is another way to proceed with payment options.

Moving forward, several state rules and regulations require business entities to present an EIN for income tax return reports.

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