One of the first choices you will need to make when starting a business is whether to create a limited liability corporation (LLC) or acquire an employment identification number (EIN). Even though there is no clear-cut answer to the question of which comes first, being aware of the goals and specifications of each can help you make a well-informed choice. Formation of an LLC
The flexibility and ease of a partnership with the limited liability protection of a corporation are combined in an LLC, a type of business organization. Because they provide pass-through taxation, personal liability protection, and easy setup, LLCs are popular among small business owners. You must submit articles of incorporation to the state where you intend to conduct business in order to create an LLC. While each state has its own rules for creating an LLC, most of them include choosing a company name, appointing a registered agent, and paying a registration fee. Application for EIN
The Internal Revenue Service (IRS) issues an EIN, a special nine-digit number, to identify your firm for tax purposes. If you want to file taxes, create a company bank account, recruit staff, or apply for licenses and permits, you’ll need an EIN. EIN applications can be submitted for free online, by mail, fax, or phone. You must submit your business name, legal form, mailing address, social security number, or taxpayer identification number with your application. EIN and the articles of incorporation LLCs may also be required to submit articles of organization or other comparable paperwork with their state, despite the fact that articles of incorporation are normally associated with corporations. However, obtaining an EIN is not contingent upon having articles of incorporation. The IRS does not mandate that LLCs have a particular organizational structure or form, but it does demand that the company be legally named and registered with the state. You can apply for an EIN using your personal social security number and amend your information later if you need one but have not yet formed your LLC. LLC name and EIN both end with
. The name you use on your tax returns and other official papers should be the same as the name on your EIN, even if they don’t have to exactly match. After obtaining an EIN, if the name of your LLC changes, you must file Form SS-4 with the IRS to amend your information. You will require a new EIN if you change the legal structure of your company from a sole proprietorship or partnership to an LLC.
Obtaining an EIN Later If your LLC is already established but you still don’t have an EIN, you can apply for one at any time. To minimize delays in opening a bank account, recruiting staff, or filing taxes, it is advised to get an EIN as soon as feasible. If you’re unsure whether you need an EIN, you can speak with a tax expert or find out more information on the IRS website.
In conclusion, your particular business requirements and timetable will determine whether you choose to create an LLC or get an EIN first. You will require an EIN if you intend to hire staff members or open a business bank account. You might wish to create an LLC if you desire pass-through taxation and protection from personal liability. Never forget to seek legal or tax advice before making any choices regarding your business.