Does a Single-Member LLC need an EIN?

An EIN (employer identification number) is a nine-digit number assigned to a business by the IRS for tax identification purposes. Limited liability companies (LLCs) with employees or more than one owner are required by law to acquire an EIN, but not all single-member LLCs are required to get one. Still, there are some compelling reasons for even these LLCs to have an EIN.

Some single-member EINs are allowed to use the owner’s Social Security number instead of an EIN when filing federal taxes. But having an EIN can help single-member LLC owners further separate their personal and business financials, open business bank accounts, safeguard against identity theft, and establish a credit history for their business.

Should I get an EIN for a single-member LLC?

A single-member LLC is a business structure that offers liability protection and is operated by a single owner; LLC owners are called “members.” Unlike multi-member LLCs, an LLC with a single owner is generally not required to have an EIN unless they have employees or meet other criteria where the IRS explicitly requires an EIN for federal tax purposes. Depending on the state you live in and the goals for your business, using an EIN can be a beneficial tool to operate your business, regardless of whether or not it’s legally required. 

EIN Requirements for Single-Member LLC

The IRS requires a single-member LLC to have an EIN if any of the following apply:

• It has employees.
• It files taxes as a corporation.
• It files any of these tax returns: excise, employment, or alcohol, tobacco, or firearms.
• It withholds taxes on income, other than wages, paid to a non-resident alien.
• It has a Keogh plan (a pension plan for self-employed people).
• It’s involved with any of the following types of organizations:
  • Non-profit organizations
  • Trusts (except certain grantor-owned revocable trusts, IRAs, or exempt organization business income tax returns
  • Estates
  • Real estate mortgage investment conduits
  • Farmers’ cooperatives
  • Plan administrators

Some states require all LLCs to acquire an EIN for state tax purposes, and certain business licenses and permits also require one. In addition, most banks will require a single-member LLC to have an EIN before opening a business bank account.

Sole Proprietorship Taxation

By default, a single-member LLC is treated as a “disregarded entity” by the IRS, meaning that they don’t acknowledge the LLC as a taxable entity and instead treat the business as a sole proprietorship. A disregarded entity is not considered a registered business for federal tax purposes, and taxes for the business are collected through the owner’s personal income tax return.

This allows single-owner LLCs to avoid “double taxation” by having their business profits pass through to their personal tax returns without first being taxed at the business level. In a typical corporation, profits are taxed at the business level and again when they’re distributed to the individual owners. 

Should single-member LLCs use an SSN or EIN?

Even if a single-member LLC falls into the category of LLCs not required to get an EIN, there are still plenty of reasons to have one:

• Opening a business bank account. Most banks require an EIN for opening a business bank account. Having a separate banks account for your LLC is critical for organizing your financing at tax time and protecting your limited liability status. Without one, someone may be able to challenge the legitimacy of your LLC and go after your personal assets with a lawsuit.
• Identity theft protection. If you’re constantly using your SSN on business documents, it increases the chances that someone will try to use your SSN for identity theft or other nefarious purposes.
• Processing payments. Some vendors or others you do business with may require an EIN to process payments.
• Legitimacy. Having an EIN on your official paperwork instead of your personal SSN makes you appear more credible to those you do business with.
• State tax requirements. Some states will ask for your EIN when you submit your state tax return.
• Being taxed as a corporation. LLCs are very flexible when it comes to tax options. Some LLCs can save money on self-employment taxes by opting to be taxed as an S corporation, while certain larger LLCs may benefit from being taxed as a C corporation. But being taxed as a corporation requires an EIN.
• Establishing credit. Having an EIN for your LLC helps it to develop its own credit history apart from your own, which could be useful for things like getting a business loan.

How to Get an EIN for a Single-Member LLC

To get an EIN for an LLC, you must file an EIN application with the IRS. The cost of an EIN is $0. You can receive your EIN immediately by filling out an online application through the IRS website, or by printing and filling out an SS-4 form to be either faxed or mailed to the IRS. In order to apply for an EIN you must complete the following steps:

Step 1: Choose a tax status for your business.

Single-member LLCs can choose to be taxed as a sole proprietorship, an S corporation, or a C corporation. In order to change the tax status of your LLC to a C corporation, you must file Form 8832 (Entity Classification Election) with the IRS in addition to your EIN application. You need to file Form 2553, Election by a Small Business Corporation, to get S corporation status. Learn more on our how to apply for S corp status page.

Step 2: Fill out information about your business.

Information about your business includes listing yourself as the sole owner of the LLC (no additional members), choosing the state your business is located, providing a reason for your EIN application.

Step 3: Enter your personal information.

As the sole owner of your LLC, you’re automatically considered the responsible party, also known as the applicant entity, and are required to list your personal information on your EIN application.

Step 4: Provide your business address and any additional information.

In addition to providing the physical location of your business, you also need to submit the legal name of your LLC, details of formation, Articles of Organization, and answer other questions for federal tax purposes.

Step 5: Confirm your EIN application.

After completing your application, you can select to receive your confirmation letter by mail, fax, or online. 

After You Get an EIN for Your Single Member LLC

After receiving your EIN, you’ll be able to:

• Open a business bank account and apply for credit cards using your business name.
• Establish credibility for your business.
• More easily separate your personal and business financials.
• Protect yourself from identity theft by using your EIN instead of your SSN.

We can help!

Our team of experts can help you start your LLC and apply for an EIN today so you can start your next business venture without complications. Simply provide us with basic information about your business through our formation service and we can file the paperwork on your behalf. With formation plans starting at $0, we help ensure your business is fully compliant so you can focus on growing your dream.