When Is a Business Required to Obtain a New Employer Identification Number (EIN)?

Introduction to Employer Identification Numbers (EIN)

Every business operating in the United States may be required to obtain a unique Employer Identification Number (EIN). The Internal Revenue Service (IRS) provides guidelines on when a business needs a new EIN. This article explores the situations in which a business must apply for a new EIN, helping business owners stay compliant with the IRS regulations.

Sole Proprietors: When to Obtain a New EIN

Sole proprietors may need a new EIN when any of the following conditions are met:

You are subject to a bankruptcy proceeding. You incorporate. You take in partners and operate as a partnership. You purchase or inherit an existing business that you operate as a sole proprietorship.

However, if you change the name of your business, change your location, operate multiple businesses, or change your location, you do not need a new EIN.

Corporations: When to Obtain a New EIN

Corporations require a new EIN in the following scenarios:

A corporation receives a new charter from the secretary of state. You are a subsidiary of a corporation using the parent's EIN, or you become a subsidiary of a corporation. A new corporation is created after a statutory merger.

On the other hand, you do not need a new EIN if you are a division of a corporation, the surviving corporation uses the existing EIN after a merger, a corporation declares bankruptcy, or the corporate name changes.

Partnerships: When to Obtain a New EIN

Partnerships may require a new EIN in these situations:

You incorporate. Your partnership is taken over by one of the partners, and it is operated as a sole proprietorship. You end an old partnership and begin a new one.

If the partnership declares bankruptcy, changes its name, or changes its location, you do not need a new EIN.

Limited Liability Companies (LLCs): EIN Requirements

Limited Liability Companies (LLCs), which are typically classified as corporations, partnerships, or disregarded entities for tax purposes, may need a new EIN in specific scenarios:

Single-member LLCs without employees or excise tax liability do not need a new EIN if they have not elected to be treated as corporations. Select situations require a new EIN for LLCs, especially if they start operating as corporations or S corporations, or have excise tax filing requirements.

LLCs with employees are required to report and pay federal employment taxes and certain federal excise taxes under the name and EIN of the LLC instead of the owner, requiring a new EIN if none was previously assigned.

Estates and Trusts: EIN Requirements

Estates and trusts may need a new EIN for the following reasons:

A trust is created with funds from the estate, not simply a continuation of the estate. You represent an estate that operates a business after the owner's death.

However, you do not need a new EIN if the trustee, grantor, or beneficiary changes their name or address.

Conclusion

Understanding when to obtain a new EIN is crucial for maintaining compliance with IRS regulations. This article provides a comprehensive guide based on the IRS guidelines. Always consult with a tax professional or an attorney for personalized advice.

FAQs

Q: Do I need a new EIN if I change the name of my business?

A: Generally, no. Changing the name of your business does not require a new EIN. However, if there are other changes such as incorporation or bankruptcy, a new EIN may be necessary.

Q: Can I obtain an EIN for banking or state tax purposes?

A: Yes, you can request an EIN for banking or state tax purposes, even if it's not required for federal tax purposes.

Q: What should I do if I believe I need an EIN but am unsure?

A: Consult with a tax professional to ensure compliance with IRS regulations and avoid any complications or penalties.