You may have heard of EINs, or Employer Identification Numbers, if you own a business. The Internal Revenue Service (IRS) issues each company a special nine-digit number for tax purposes. However, the question of whether each firm requires an EIN emerges. It depends, is the answer.
You must obtain an EIN for each business you own if they are independent legal entities, such as LLCs, companies, or partnerships. Because each entity is distinct and separate, it needs its own EIN. This is significant in terms of taxes because each entity will prepare and submit its own tax returns.
You do not, however, require more than one EIN if your many enterprises are all a part of the same legal organization, such as a sole proprietorship. You would use the same EIN in this situation for all of your enterprises.
What about an LLC with only one member? Must they obtain an EIN? It depends, is the answer. The owner’s social security number may be used for tax purposes if the single-member LLC is a disregarded entity, which means it is not taxed separately from its owner. However, a single-member LLC will require its own EIN if it is taxed independently of its owner.
Can you change the details of your EIN? You can, indeed. You can provide the IRS with updated information about your company, such as a change in address or name, by submitting Form SS-4. Through the IRS website, you can also change your information.
What advantages come with having an EIN number, then? The IRS first and foremost requires it for tax purposes. You are unable to register your business, recruit staff, or file taxes if you do not have an EIN. Additionally, having an EIN can help you demonstrate your company’s validity and trustworthiness, which is helpful when interacting with clients, suppliers, and customers. Additionally, it enables you to keep your personal finances distinct from those of your business, which can help safeguard your personal assets in the case of a lawsuit or bankruptcy.
In conclusion, the legal makeup of your business(es) will determine whether or not you require an EIN for each one. You will require a different EIN for every legal entity you own if you have more than one. You can use the same EIN for all of your enterprises if they are owned by the same legal organization. In addition to being crucial for tax purposes, obtaining an EIN may support the validity of your company and safeguard your personal assets.
Sending a letter to the IRS with the full legal name of the company, the EIN, the company address, and a justification for the closure is required in order to cancel an EIN number. You can also make a request to close the EIN number by calling the IRS Business and Specialty Tax Line. Before seeking the closure of the EIN, be sure to shut all tax accounts connected to the EIN and submit the final tax return.