Should You Get an EIN Before or After Forming an LLC?

It’s no secret that starting a business often involves a maze of paperwork, legal decisions, and procedural steps. However, one common question new owners face is whether they should obtain an Employer Identification Number (EIN) before forming their limited liability company (LLC) or wait until after the formation. 

This article will explore the role of an EIN, when and how to apply for one, and the implications of getting it before or after your LLC is officially formed.

What Is an EIN?

Also known as a Federal Tax Identification Number (EIN), the Internal Revenue Service (IRS) issues an employer identification number (EIN). It serves a similar purpose to a Social Security number for a business. The EIN is used to identify your company for tax purposes, open business bank accounts, hire employees, and apply for business licenses.

Why Do You Need One?

Most LLCs are required to have an EIN, especially if they meet any of the following criteria:

• Hire employees
• File excise taxes
• Operate as a multi-member LLC
• Are taxed as a corporation or partnership
• Open a business bank account
• Apply for state or local licenses

Even single-member LLCs that do not hire employees often choose to obtain an EIN to maintain separation between personal and business finances.

The LLC Formation Timeline

Before you apply for your EIN, you must understand the steps in forming an LLC:

1. Choose a Business Name: Confirm it’s available in your state.
2. File Articles of Organization: Submit to the Secretary of State or state agency.
3. Designate a Registered Agent: Required in most states.
4. Create an Operating Agreement: Optional but recommended.
5. Obtain an EIN: Required for tax purposes and business operations.
6. Fulfill State Requirements: Such as publishing notices or obtaining business licenses.

Obtaining an EIN usually comes after filing your Articles of Organization, but not always.

Can You Get an EIN Before Forming an LLC?

Yes, applying for an EIN before officially forming your LLC is possible, but this is generally not recommended. If you do so, the IRS will associate the EIN with your name or as a sole proprietorship, not with the legal entity of the LLC. If your LLC formation fails, the EIN becomes unusable or incorrect, creating complications.

What Happens If You Get an EIN Too Early?

Applying for an EIN before the LLC exists legally can result in several issues:

1. Mismatched Records

The EIN will be tied to an entity that the IRS considers a sole proprietorship or general partnership, rather than the LLC. If your LLC formation documents are later filed with a different name or structure, you must update or reapply for an EIN.

2. Risk of Rejection

When you eventually submit your LLC documents to open a business bank account or apply for licenses and permits, the mismatch between the IRS record and your LLC information could result in delays or outright rejection.

3. Administrative Burden

Correcting the business classification with the IRS involves significant paperwork and phone calls. You may cancel the original EIN and request a new one, which requires time and effort that could be avoided by waiting.

Best Practice: Form Your LLC First

The safest, most efficient path is to wait until your Articles of Organization have been filed and accepted by your state before applying for an EIN. Once the LLC is officially recognized, you can provide accurate legal information to the IRS, ensuring a seamless match in their system.

Steps to Take After Forming Your LLC

1. Wait for State Approval: Do not proceed until you receive confirmation from your state’s business division.
2. Apply for Your EIN: Use the LLC’s official name and formation date as listed in your Articles of Organization.
3. Open a Business Bank Account: Use your EIN and formation documents to separate finances.
4. Register for State Taxes: Depending on your state and business activities, you may be required to obtain additional registrations.

How to Apply for an EIN

Applying for an EIN is free and can be completed directly through the IRS. Here’s how:

• Online: The IRS offers an EIN Assistant tool available Monday through Friday. This is the fastest method, and you’ll receive your EIN immediately.
• Fax or Mail: Fill out Form SS-4 and send it to the IRS. Processing times vary, with fax being faster than mail.
• Phone (for International Applicants): If you don’t have a Social Security number or Individual Taxpayer Identification Number, you may need to apply by phone.

Required Information

When applying for an EIN, you’ll need the following:

• Legal name of the LLC
• Mailing address
• Responsible party’s name and SSN/ITIN
• Reason for applying
• Type of entity
• Date the business was started or acquired

Ensure this information aligns with your filed Articles of Organization to prevent errors.

Exceptions: When You Might Apply Before Forming an LLC

Although it’s generally best to wait, some situations may call for early EIN application:

1. Professional Filing Services

Some LLC formation companies obtain an EIN as part of their package. In these cases, they may apply shortly after submission of your Articles of Organization but before final approval. This works because they are experienced in precisely aligning the timing and paperwork.

2. State-Dependent Timelines

In rare cases where the state’s formation approval takes weeks or months, and a business must begin operations quickly (e.g., signing a lease, payroll setup), applying early may be considered. However, this should only be done with full knowledge of the risks involved.

3. Sole Proprietorship Conversion

If you previously operated as a sole proprietor and already had an EIN, and you’re converting to an LLC, the IRS may allow you to keep the same EIN if there’s no change in ownership or business structure. This is only permitted in specific circumstances.

What If You Already Have an EIN in Advance?

If you already applied for an EIN before forming your LLC, here’s what you can do:

Option 1: Cancel and Reapply

If the EIN was issued under your name as a sole proprietorship, and you now have an LLC, you must cancel the original EIN and request a new one tied to the LLC.

• Write a letter to the IRS indicating that you wish to close the EIN account.
• Include the EIN, the reason for cancellation, and a copy of your EIN assignment letter.

Option 2: Update the IRS

If the business name or responsible party has changed, you may be able to update the IRS records using Form 8822-B. This avoids complete cancellation but may not resolve all mismatches.

Additional Tips for a Smooth Process

Use the Correct LLC Name

Ensure the name on your EIN application matches the one approved in your Articles of Organization. Typos, abbreviations, or punctuation errors can result in IRS rejections or delays.

Understand Your Tax Classification

By default, a single-member LLC is considered a disregarded entity for federal tax purposes, and a multi-member LLC is treated as a partnership. If you want your LLC taxed as an S corporation or C corporation, you must file additional forms (e.g., Form 2553 for an S corp).

Don’t Use Your SSN for Business Transactions

While sole proprietors can use their Social Security numbers, forming an LLC and obtaining an EIN adds a layer of privacy and protection, thereby minimizing the risk of identity theft.

For your EIN, use the correct legal information. 

Frequently Asked Questions (FAQ)

1. Can I get an EIN without forming a business?

Yes, you can apply for it as a sole proprietor, but you may need a new EIN if you form an LLC.

2. Does the IRS charge a fee for an EIN?

No, obtaining an EIN from the IRS is free.

3. Can I use the same EIN if I convert from a sole proprietorship to an LLC?

Generally, no. An LLC constitutes a new legal entity and usually requires a new EIN.

4. How long does it take to get an EIN?

If you apply online during business hours, you typically receive your EIN immediately.

5. What documents do I need to apply for an EIN?

You will need your LLC’s legal name, the responsible party’s information, and a mailing address. The standard form used is Form SS-4.

Main Takeaway

The EIN might seem like a small detail, but getting it right can make a big difference in your business’s credibility, legal compliance, and financial structure. 

Although obtaining one before forming an LLC is possible, doing so can create unnecessary complications. Usually, the best course of action is to form the LLC first, receive state approval, and then apply for your EIN using the correct legal information.

Incorporate Your Business Now

NCH can help you start and grow a business with confidence. From forming your LLC to obtaining your EIN and staying compliant year-round, our experts offer personalized support every step of the way. Let us simplify the process so you can focus on building your business.

Start your LLC within 24 hours and ensure your EIN is issued accurately and on time.

Call 1-800-508-1729 to book your free consultation!

DISCLAIMER: The above material has been prepared for informational purposes only, containing opinions of the provider and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.