Does an LLC Need an EIN? Rules & Requirements Explained

Starting a business can feel overwhelming, especially when you factor in all the legal processes and paperwork you have to complete.

One example of a common bureaucratic process for business owners in the U.S. is acquiring an EIN (Employer Identification Number). In this blog post, you’ll learn exactly what that is, whether you need one if you’re setting up an LLC, and how to apply for one.

Does an LLC Need an EIN?

An EIN is a unique nine-digit number that the IRS assigns you which you use to identify your business when filing taxes. It’s a lot like a social security number, but instead of for personal use, it’s for use in a professional context.

You may also hear of the EIN referred to as a Federal Tax Identification Number. If you're wondering, "Does my LLC need an EIN?"; in most cases, yes. An EIN is necessary for the IRS to track your business to make sure you’re keeping up with your tax obligations.

You will generally also need an EIN for the following purposes:

• Opening a business bank account
• Applying for a license or permit
• Hiring employees
• Filing federal and state taxes
• Establishing business credit

Without one, you won’t be able to complete a lot of these processes which are integral to the formation of your LLC.

If you change your business structure, you may also be asking: “Does an LLC need a new EIN number?” The answer is yes. Changing your business structure can include any of the following:

• Adding new members
• Becoming taxable as a corporation

Does a Single-Member LLC Need an EIN?

If you’re setting up a single-member LLC, meaning it’s just you and you have no employees (or plans to hire any), you won’t typically need to apply for an EIN. One exception to this would be if you were to elect to be taxed as a corporation.

Generally speaking, if you operate your business as a single-member LLC, you can use your personal social security number for tax filing purposes.

However, there are a few reasons you might like to apply for an EIN:

• Privacy - Applying for an EIN affords you a greater deal of privacy as it prevents any overlap between your business and personal information. When you use your social security number, it can expose you to certain security risks.
• Simple banking - Since many banks require an EIN to open a business bank account, it can be a good idea to apply for one for this purpose
• Legitimacy - In the eyes of some vendors and suppliers, an EIN is a sign of business legitimacy and professional credibility. Without one, some businesses might see doing business with you as a risk.

Sole proprietors and independent contractors, much like single-member LLCs, don't legally require an EIN, but could also benefit from applying for one as it offers greater distinction between the personal and professional and can enhance the credibility of the business.

When is an EIN Required for an LLC?

There are various situations in which you would need an EIN as an LLC.

Hiring employees

To hire employees as an LLC in the U.S., you must have a valid EIN. Even if you don’t currently have employees, but plan to hire some down the line, you’ll need an EIN.

The IRS uses this unique identifier number to track your payroll taxes and employee reporting practices.

Having multiple LLC members

Does a multi member llc need an EIN?

Yes, if you’re setting up an LLC with one or more people, you’ll need to register for an EIN, regardless of whether you plan to hire employees now or in the future.

Opening a business bank account

Opening a business bank account generally requires an EIN from an LLC as part of the registration process. This means that even if you run a single-member LLC, you might still need an EIN to open a business bank account.

Many banks require this for opening business bank accounts as it’s a way to confirm the legitimacy of your business and is often necessary for key processes like credit applications and loans.

When Might an LLC Not Need an EIN?

In some cases, you might not need to apply for an EIN as an LLC.

Single-member LLCs with no employees

As a single-member LLC with no employees (or plans to hire any) you generally wouldn’t need to apply for an EIN. The default IRS classification for a single-member LLC is a disregarded entity, so if you fall under this category, you can use your social security number to file your federal taxes.

Remember the caveat here: you might still need an EIN for some business processes like opening a business bank account or trading with certain vendors.

There are also several exceptions for single-member LLCs which would require you to reply for an EIN:

1. You have excise tax liability - If you sell alcohol, tobacco, fuel or specific goods which you have to pay excise tax on, you’ll need to register for an EIN.
2. You have a Keogh retirement plan - With a specific type of retirement plan that involves the deferment of taxes, you would need to register for an EIN regardless of what type of LLC you’re looking to set up.

Can I use my Social Security Number instead of an EIN?

If you operate a single-member LLC, you can use your social security number instead of an EIN when filing federal taxes. However, you do assume a small level of risk when doing so as your personal information will be mixed up in your business dealings so it can be slightly less secure than an EIN.

How to Apply for an EIN

The process of registering for an EIN is free and shouldn’t take too long.

Online application through the IRS

For many business owners, the best way to apply for an EIN is to do so online through the IRS website.

To complete the registration process online, you’ll be required to:

• Give details about your business structure
• Provide your name and social security number
• Enter your address
• Explain your reason for applying

Once the application is complete, you should receive your EIN within minutes in digital form.

This online IRS service is available from Monday to Friday, 7am to 10pm Eastern time.

Applying by mail or fax

If you would prefer to apply offline, you can submit an application via mail or fax.

Here’s how you would do that:

• Download Form SS-4 from the IRS
• Fill it out and either fax or mail it to the IRS
• Wait around 4 business days by fax or between 4-6 weeks by mail

The Smart Way to Manage Business Payments

Once you’ve formed an LLC, you’ll want to turn your attention to money-making activities. Regardless of what industry you’re in, you’ll need to make and receive payments. Wise Business makes it easy to set up an account and even manage multiple currencies all in one place.

Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. The Wise Business account is designed with international business in mind, and makes it easy to send, hold, and manage business funds in 40+ currencies. You can get major currency account details for a one-off fee to receive overseas payments like a local. You can also send money to 140+ countries.

Open a Wise Business account online