Can I Get an EIN Without Having an LLC?
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You may be wondering, "can I get an EIN without an LLC?" This is a question that many small business owners need the answer to.
The EIN stands for Employer Identification Number, and it is a tax identification number that the IRS uses. Your EIN identifies your business for both tax purposes, and it can act as a social security number for a business.
A limited liability company (LLC) is a type of business structure that protects business owners from having personal responsibility for the business' liabilities and debts. They are a hybrid type of business entity that combines the characteristics of a corporation with that of a sole proprietorship or partnership.
In this article, we will explore whether or not you should get an EIN before forming your LLC.
Should I Form My LLC Before Getting My EIN?
We recommend you form your LLC before you get your EIN. One of the main reasons is that when you apply for your EIN, the IRS application asks you to submit the approved legal name of your business and the date it was formed. So, it is helpful to have your LLC formed and registered before you try to get your EIN.
When is an EIN Required?
If your small business is a sole proprietorship or a single-member LLC, and you do not have employees, you might not need to have an EIN, unless you chose to be taxed as a C corporation or as an S corporation when you registered your single-member LLC. In this case, you would use your Social Security Number for your tax filings.
You will need to have an EIN for your LLC if any of these apply to your business:
- You are a multi-member LLC.
- You are a single-member LLC who chose to be taxed as a C corporation or an S corporation.
- You are a single-member LLC that has, or intends to have, employees. This applies no matter how you elected to be taxed.
Why Else Would I Need an EIN?
A business owner should keep their personal and business finances separate, even if it is just you operating out of your home with no employees. It can be a headache during tax season to have your personal and professional finances combined, whereas keeping finances separate means you do not have to remember if certain purchases were business expenses or not. Your bookkeeper or accountant will thank you for having separate finances.
You can start untangling your personal and professional by opening a separate bank account for your business. By having a separate account for your business, you will be safeguarded against an audit, and it also makes your business feel more professional. Many banks require you to have an EIN to open a business bank account.
Your EIN acts similar to a Social Security Number for your business. If you need to take out a loan for your business, you can use your EIN for it instead of your Social Security Number, so the loan is taken out for your business instead of under your name. This means if something happens to your business financially, your personal assets will not be affected.
You can also take out a credit card for your business and a line of credit for your business using your EIN. Even if you do not have employees, having an EIN can be highly beneficial to your business finances.
Can I Get an EIN Without Having an LLC?
You can file for your EIN before forming your LLC, but it is not recommended. If you do not have your LLC registered before applying for an EIN, your application might get rejected by the IRS because it cannot be validated against any state databases.
If your EIN does get approved before you have formed your LLC, and the name for your LLC gets rejected, you will then need to refile all of the EIN paperwork to get everything changed. It is much easier and more straightforward to wait until your LLC is fully formed before applying for the EIN.
What if I Got My EIN First?
It is possible to get an EIN first. If you apply for your EIN before forming your LLC, one of two things can happen. If the state approves your LLC after you have the EIN for the business, then you are good to go. The names match up, and that is what matters.
However, if you get approved for your EIN and then your LLC is rejected by the state, you will need to refile for your EIN using a new, approved name. You first cancel the EIN for the rejected name. Then, fix the issues with your LLC name, and wait for the approval. Once it is approved, apply for a new EIN.
How Do I Incorporate My Business?
You can incorporate your business by following these steps:
- Choose a name for your LLC. States vary on the rules here, but most states require the name to end with LLC and that it not be the same name as another LLC or business entity in your state.
- File the articles of organization with your state. Each state has its own requirements for this filing that you will need to read.
- Select a registered agent. A registered agent is a person or company that will accept legal papers on behalf of your LLC if you get sued. LLCs are usually required to have an agent who is physically present in their state.
- Create an operating agreement. Not all states require this, but it is still a good idea to make. This is a document that establishes how you will run your LLC and how it will be managed.
- Apply for a business license.
- Obtain an EIN.
- Register for sales and employer taxes.
People Also Ask
There are some other common questions about getting an EIN without having an LLC that we would like to answer here.
- Can I open an LLC without an SSN? Yes, you can form an LLC without a Social Security Number. However, you will need to have a Social Security Number to obtain an EIN for your business.
- Can you have an LLC without an EIN? Yes, you can have an LLC without needing an EIN. You only need an EIN under the circumstances we highlighted above in this article.
- Can you get an EIN without a business? You can, but you should not. You only need an EIN if you are a business that has employees, so if you have not started the business yet, it is unnecessary to apply for an EIN. There is also a chance that the IRS will reject the application if they do not see your business registered with your state.
An EIN Can Help Secure Business Funding
Even if your business does not need an EIN taxwise, you should still consider getting one for your business to help you secure more funding for it. Using your EIN, you can keep your business and personal finances separate, which can be important legally if something happens in your personal or professional life that impacts your assets.
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Editor’s Note: This post was originally published on September 30, 2020 and has been updated for accuracy and comprehensiveness.