Also referred to as a “Tax ID number,” the EIN may be a business federal tax ID that works sort of a Social Security Number for your business. EIN helps in filing tax returns and open a business checking account under the desired name of your business, helps you properly pay, and keep an account for wages and employee payroll of your company. It also helps to maintain official standing as a legal business entity and establish credit for your business.
Sometimes if you own an LLC and it’s a single-member LLC with simple accounting, you’ll get by just using your personal Social Security Number for tax purposes and for receiving payments from clients. But even the only businesses can generally enjoy using an EIN – the EIN is a tax ID for your LLC or other corporate entity.
An EIN is mandatory for all general and limited partnerships Multiple-member LLCs: this sort of business entity needs an EIN irrespective of you’ve employees or not.
Single-member LLCs: If you propose to rent employees within the subsequent 12 months, you’ll get to get an EIN. And albeit your single-member LLC has no employees, and albeit you’ll get by with using your own individual Social Security Number for tax purposes, it’s still an honest idea to urge an EIN because many banks and lenders will like better to use an EIN to try to do business with you.
LLC taxed as an organization: If your LLC chooses to be taxed as a Corporation (for example, by electing to be treated as an S-Corporation for tax purposes), you’ll get an EIN. Sole proprietorship with employees: albeit you do not have an LLC or the other legal entity for your business and you run an easy sole proprietorship, you continue to get an EIN if you’ve got employees or decide to hire employees within the next 12 months.