Recently we were asked if a single-member limited liability company (LLC) has to get a new EIN after it hired an employee. Again we provide the typical lawyer’s answer, which is “it depends.” The Internal Revenue Service (IRS) rules regarding this situation are as follows:
Single Member LLCs with Employees. For wages paid on or after January 1, 2009, single member/single owner LLCs that have not elected to be treated as corporations may be required to change the way they report and pay federal employment taxes, wage payments, and certain federal excise taxes. On August 16, 2007, changes to Treasury Regulation Section 301.7701-2 were issued. The new regulations state that the LLC, not its single owner, will be responsible for filing and paying all employment taxes on wages paid on or after January 1, 2009. These regulations also state that for certain excise taxes, the LLC, not its single owner, will be responsible for liabilities imposed and actions first required or permitted in periods beginning on or after January 1, 2008.
A single member LLC has been filing and paying employment taxes under the name and EIN of the owner, and no EIN was previously assigned to the LLC, a new EIN will be required for wages paid on or after January 1, 2009. If a single member LLC has been filing and paying excise taxes under the name and EIN of the owner and no EIN was previously assigned to the LLC, a new EIN will be required for certain excise tax liabilities imposed and actions first required or permitted in periods beginning on or after January 1, 2008. The following examples may assist in determining if a new EIN is required:
- If the primary name on the account is John Doe, a new EIN will be required.
- If the primary name on the account is John Doe and the second name line is Doe Plumbing (which was organized as an LLC under state law), a new EIN is required.
- If the primary name on the account is Doe Plumbing LLC, a new EIN will not be required.
You will be required to obtain a new EIN if any of the following statements are true.
- A new LLC with more than one owner (Multi-member LLC) is formed under state law.
- A new LLC with one owner (Single Member LLC) is formed under state law and chooses to be taxed as a corporation or an S corporation.
- A new LLC with one owner (Single Member LLC) is formed under state law, and has an excise tax filing requirement for tax periods beginning on or after January 1, 2008, or an employment tax filing requirement for wages paid on or after January 1, 2009.
You will not be required to obtain a new EIN if any of the following statements are true.
- You report income tax as a branch or division of a corporation or other entity, and the LLC has no employees or excise tax liability.
- An existing partnership converts to an LLC classified as a partnership.
- The LLC name or location changes.
- An LLC that already has an EIN chooses to be taxed as a corporation or as an S corporation.
- A new LLC with one owner (single member LLC) is formed under state law, does not choose to be taxed as a corporation or S corporation, and has no employees or excise tax liability. NOTE: You may request an EIN for banking or state tax purposes, but an EIN is not required for federal tax purposes.
Carlos L. McDade, Esq.
