When someone wants to start a business, there are several business entity options to choose from such as C-corporation, S-corporation, and the Limited Liability Company or the LLC.
All these business entities have their own advantages and disadvantages.
In order to legally establish your business, first you will need to register your business with the state or you can submit to form LLC online. Once the business registration is approved, you can proceed to apply for the tax identification number, also known as the Employer Identification Number or EIN.
Registration of EIN is free and it is assigned by the Internal Revenue System or IRS by completing the Tax ID application at the IRS website.
An EIN is a unique 9-digit business tax number. An EIN is required to open bank accounts, apply for small business loans, run payroll, obtain company credit cards, etc.
This EIN separates the business owner’s financial assets from the business assets which is an important advantage of the LLC. The LLC also protects its members or owners from liabilities such as credit, lawsuit, and bankruptcy problems.
The ultimate protection and liability risks will depends on how the LLC chooses to operate, whether as a sole proprietorship, a partnership, or as a corporation.
The reason many business owners chose the LLC entity type because of its flexibility of ownership. A LLC functions as a separate entity from the owner of the LLC entirely.
If a LLC has more than one owner, the owners can choose to file their tax returns either as a partnership or as a corporation. Partnerships pass through their income to personal tax returns.
Business owners operating as a sole proprietorship or a LLC with no employee do not need to obtain an EIN. But if a LLC has more than one owner or member, or if you have an employee working in your company, you will need to obtain an EIN for your LLC.
For those who are not sure of how to go about forming a LLC or obtaining an EIN, you can get assistance from service providers such as GovDocFiling and you can visit their website https://www.govdocfiling.com/ for more details. If you need to any legal advice, it is better to speak with a skilled tax attorney near you.
Once an EIN has been issued to your LLC, it does not expire.
But there are certain instances where…….
Business owners need to obtain a new EIN such as the following:
- When someone obtain an existing business with the intention to run it as a sole proprietorship.
- When a business changes from a sole proprietorship to a corporation or partnership.
- When a business changes from a partnership to a corporation or sole proprietorship.
- When a business changes from a corporation to a partnership or sole proprietorship.
- When an individual owner dies, and the business is taken over by the estate.
An EIN can be obtained via online, fax, or through postal mail, and online application is the preferred method because it saves time. Online application is available for all business entities who principal office or legal residence is in the US.