LLC EIN APPLICATION SERVICE

WHAT IS A LIMITED LIABILITY COMPANY (LLC)?

A limited liability company (LLC) is a type of business structure that blends the characteristics of a corporation with a partnership or a sole proprietorship.  To establish an LLC, the organizing member(s) of the LLC must file articles of organization with the state’s secretary of state to establish the entity as a limited liability company.  The name of the LLC is unique in the state.  There is only one active LLC at any time with the same name within the same state.  An LLC can have only one member or an unlimited number of members.  The members can be either an individual(s), corporation(s), other LLC(s) and/or foreign entity(ies).

The attractive quality of an LLC is that it is easy to set up and the members of the LLC are not personally liable for the entity’s debts or liabilities.  In the rare case of fraud or when the LLC hasn’t met its legal and reporting requirements, creditors can still break the corporate veil. Another disadvantage of an LLC is that the LLC must be dissolved when the member(s) passes away or faces bankruptcy.

The Internal Revenue Service does not formally recognize limited liability companies, and thus business owners can elect how they wish to be taxed.  LLCs can elect to be taxed as a sole proprietorship (if there is only one member), a partnership or a corporation.

A single-member LLC may or may not need to apply for an LLC EIN for their newly formed LLC.  If the LLC is a home-based business, the single member can elect to be taxed a sole proprietor using the member’s own name before the IRS and use their sole proprietor EIN as the tax number for the LLC.  However, a tax ID number for LLC is required if the single member LLC decides to expand its business and hires employees.

Multi-member LLCs operating as a partnership and those electing to be taxed as a corporation must obtain a federal tax ID for LLC.

An LLC TIN is also required if the structure of the LLC changes.  For example, you operate a single member LLC and have chosen to be taxed as a sole proprietorship.  If you decide to be taxed as a corporation, you have now changed your tax structure, and must obtain an IRS LLC tax ID number.  After a sale of the limited liability company, the new owners must also obtain an LLC EIN from the Internal Revenue Service.