Starting a business is exciting, but when it gets down to paperwork, things can get pretty confusing.
One of the first questions that more or less start all those who are setting off into entrepreneurship is, “Can you get an EIN number before an LLC?” Well, if you are still confused, don’t worry—you are not alone.
In this post, we shall break down everything you need to know about EINs—Employer Identification Numbers—and LLCs—Limited Liability Companies. So, let’s begin!
What is an EIN?
Before I answer that main question, let’s explore first what an EIN actually is. An Employer Identification Number (EIN) is a nine-digit number, unique to you, assigned by the Internal Revenue Service (IRS) to identify your business.
Think of it like a Social Security Number, but for your business.
Here are some scenarios in which you may need an EIN:
- You’re hiring employees.
- You’re opening a business bank account.
- You file taxes for your business separately from your personal taxes.
An EIN is vital to the running of any type of business, but do you need to have an LLC before getting one? Let’s find out.
What is an LLC?
An LLC is a type of business structure used by companies that have an intention to run the enterprise as an LLC, providing flexibility in management and ownership while at the same time legalizing any kind of protection for your personal assets. That is if your business is involved in a lawsuit or debt your home or car etcetera is safe.
There are a lot of reasons and benefits of having an LLC, such as the following:
- Liability is limited: If your business is in a lawsuit or owing a lot of money, then nothing can be done to take your home or car off of you or anything else like it, but this will be in your personal life protected.
- Tax flexibility: The IRS allows LLCs to decide which kind of tax they would want, which could be as a sole proprietorship, partnership, or corporation.
- Credibility: Having “LLC” in your name immediately earns you the trust of clients and customers.
But do you really need to have an LLC set up before you can get an EIN? Let’s explore that now.
Can You Get an EIN Number Before LLC?
The easy answer is yes: you can get an EIN before forming an LLC. However, do keep a few things in mind if you’re going to get an EIN before forming an LLC.
According to the IRS, you can apply for an EIN regardless of whether or not you have actually formed a business. Here is how this work is done:
Sole Proprietorship
You can obtain an EIN even if you don’t have an LLC, which is always the case if you are operating as a sole proprietor. However, when you file for your LLC, you may need to update the information you provided to the IRS in connection with your obtaining of an EIN or even obtain a new EIN.
Multiple Businesses
Some persons could have several businesses. It is possible to apply for EINs separately for each business in case persons want to form multiple LLCs, which they intend to establish formally.
While you technically can get an EIN before an LLC is formed, generally speaking, you want to get the EIN after your LLC is formed. This way, the EIN is directly associated with your LLC and there’s much less of a chance for confusion or extra work with the IRS.
Why Might You Want To Get an EIN Before An LLC?
Although it makes more sense most of the time to wait until your LLC is formed, there are certainly situations in which getting an EIN before an LLC makes sense:
- You are starting as a sole proprietorship: If you have a small business and do not feel a necessity for forming an LLC just yet, but you still want to have employees or open up a business checking account, you will need an EIN.
- Testing the Waters: Many people would want to test their business idea and get started on operations before taking on the costs and paperwork of forming an LLC. In this case, the submission of the EIN would allow you to begin simple operations.
- Quicker Setup: Some individuals need to open a business bank account or set up payroll sooner rather than later. In this case, the EIN must be obtained ahead of the actual formation of the LLC.
While these situations may require that you obtain an EIN prior to forming an LLC, you should know that you may have additional procedures to contend with down the line, such as updating your EIN or potentially obtaining a new one.
How to Get an EIN
Applying for an EIN is easy. You can apply online with the IRS or mail in Form SS-4. Here’s a step-by-step process you can follow quickly:
- Visit the Internet Site of the IRS: To submit an application via the online EIN Assistant tool website by the IRS.
- Determine Your Entity Type: Use the appropriate selection box to enter in your type of business structure—for example, sole proprietorship, partnership, or LLC.
- Basic Information: Some basic information, including the name, social security number of the applicant, and business address, will have to be given.
- Submit an Application: After providing the information, submit the form. You will receive your EIN on-site if you apply through the website. That’s simple!
What Happens After I Form an LLC?
Once you have an officially formed LLC, you might need to update your EIN if you currently had one. Again, this depends on your situation:
- If you applied for an EIN as a sole proprietor before you formed an LLC: You may need an updated EIN because, for the IRS, a sole proprietorship and an LLC are different.
- If you filed for an EIN under a different business name: Then your LLC will need to update its information with the IRS reflecting the name of your LLC.
It is always wise to double-check on the part of the IRS that your EIN is properly associated with your LLC.
Conclusion
So, can you get an EIN number before an LLC? Yes, you can! While possible, however, it is often easier to wait until your LLC is formed so as to avoid extra complications. If you are in an urgency to start your business, or just testing the waters, then EIN first may be wise.
Just make sure that you keep all paperwork in order and update the EIN information when your LLC is ready. A business will be a significant leap, and knowing the EIN to LLC correlation is definitely one of the pivotal points in positioning yourself for success.
With a little planning and the right information, you’ll be ready to roar in no time!
For further assistance with EIN applications, check out our EIN page. Also, you can check for more information on the IRS.
Want to know more about the process? Throw your questions in the comments below!