The idea of managing multiple LLCs with just one EIN might seem enticing. However, there are some implications to understand before diving in.
So, can you have multiple LLCs under one EIN? While each LLC typically requires its own EIN, there are cases where multiple LLCs can be consolidated and operated under one EIN. Read on to learn the potential advantages and limitations of this setup and how you can apply for multiple LLCs with one EIN.
Understanding EINs and LLCs
Before delving into the possibility of having multiple LLCs under one EIN, it’s important to understand what an EIN is and its significance for businesses, and how it relates to LLCs.
An Employer Identification Number (EIN) is a unique nine-digit tax identification number assigned by the Internal Revenue Service (IRS) to identify businesses, trusts, estates, and other entities for tax purposes.
Think of it as a social security number for your business. Every business entity that engages in activities with tax implications, such as hiring employees or filing tax returns, typically needs an EIN.
A Limited Liability Company (LLC) is a legal entity that combines the limited liability features of a corporation with the pass-through taxation of a partnership or sole proprietorship.
It separates personal and business assets and protects owners from personal liability for the business’s debts or legal problems. LLCs offer a simple and flexible structure for small businesses, start-ups, and even single-member businesses.
The connection between an EIN and an LLC is that the statutory provisions for operating an LLC provide that you need an EIN to do business. In other words, it’s a legal requirement to apply for an EIN if you wish to do business as an LLC.
When Do You Need Multiple EINs?
There are several situations where obtaining multiple EINs might be necessary. Primarily, if you have multiple LLCs — each business typically needs its own unique EIN, as they’re treated as separate entities for tax purposes.
Additionally, if you operate different businesses not consolidated under a single LLC, each business requires a distinct EIN, whether they are structured as sole proprietorships, partnerships, or corporations.
When Do You Not Need Multiple EINs?
While there are instances where having multiple EINs is necessary, there are also situations where you can operate without needing multiple EINs.
Here are some circumstances when you don’t need multiple EINs:
- Single-Member LLC: If you are the sole owner of an LLC and have not chosen to be taxed as a corporation, you generally do not need a separate EIN. Instead, you can use your Social Security Number (SSN) for tax purposes, as the LLC’s income and expenses will be reported on your personal tax return.
- Sole Proprietorship: If you are operating as a sole proprietor without an LLC or any other formal business structure, you don’t need an EIN. As a sole proprietor, you can use your SSN to report your business income and expenses on your personal tax return.
- Partnership: In a partnership where there are multiple owners sharing profits and losses, the partnership itself does not require an EIN. Instead, the partnership files an informational tax return (Form 1065) to report its income and expenses, while each partner reports their share on their individual tax returns.
Even if you do not need multiple EINs, you may still choose to obtain one for organizational or privacy reasons. If your business circumstances change in the future, you may need to apply for an EIN to meet new requirements or tax obligations.
Who Can Apply for an EIN Number?
This application is open to individuals and entities responsible for running a business, including sole proprietors, partnerships, corporations, and limited liability companies,
To apply for an EIN — both the principal business location requirement (within the U.S. or U.S. territories) and a valid taxpayer identification number (such as a Social Security number) must be met.
How to Apply for More Than One EIN?
Here is a step-by-step guide on how to apply for more than one EIN:
- Determine your eligibility: Generally, each separate legal entity or business requires its own EIN. This includes entities such as LLCs, corporations, and limited partnerships. However, certain situations may allow for multiple businesses to operate under a single EIN, known as “disregarded entities.”
- Gather required information: Collect the necessary information for each EIN application, including the legal name of each entity, the responsible party’s name and taxpayer identification number, the business address, and the type of entity (e.g., LLC, corporation, partnership).
- Choose the application method: Decide whether to apply online, by mail, fax, or phone. The online application (Form SS-4) is generally the fastest and most convenient method.
- Submit the application: Depending on the chosen method, submit the completed application form electronically, by mail, fax, or phone, and follow the instructions provided by the IRS for each application method.
- Wait for confirmation: After submitting the application, allow time for the IRS to process your request. For online applications, you will receive an EIN immediately upon successful submission. For other methods, you will receive an EIN through the preferred communication method specified in your application.
- Keep records: Once you receive the EINs, make sure to keep records of each EIN and associate them with the respective entities for future reference and compliance purposes.
If you are still unsure about the application process, consider consulting a tax professional to guide you through the legal implications that can arise from applying for multiple EINs.
Advantages of Multiple LLCs Under One EIN
Transitioning to a structure where multiple LLCs operate under one EIN can offer significant benefits. It’s not a one-size-fits-all solution, but it could potentially streamline operations for certain businesses.
Here are four key advantages of having multiple LLCs under one EIN:
- Simplified Administration: Operating multiple LLCs under one EIN can simplify business administration. Instead of managing multiple tax filings, the consolidated business structure allows you to handle all business transactions, tax payments, and regulatory compliance under one roof, thus reducing paperwork and administrative complexity.
- Efficient Cash Flow Management: This structure provides an overview of all your businesses’ cash flow in one place. This can make it easier to manage funds, reduce the chance of overspending, and provide a clearer picture of your overall financial health.
- Enhanced Business Continuity: In the event of changes or disruption to one LLC, having multiple LLCs under one EIN ensures business continuity. The other LLCs under the same EIN can continue to operate normally, thereby reducing risk and ensuring stability.
- Streamlined Growth and Expansion: For entrepreneurs planning to create multiple businesses or expand into different areas, operating under a single EIN can make the process of starting new LLCs more streamlined and efficient.
Limitations of Multiple LLCs Under One EIN
While applying for multiple LLCs under one EIN has its benefits, it does come with its own set of considerations and potential drawbacks. Here are some points to consider:
- Shared Liability: Operating multiple LLCs under one EIN can blur the lines of liability. LLCs are usually separate entities to protect personal and business assets. However, when grouped under one EIN, an issue with one LLC could potentially impact the others, posing a risk to the overall business structure.
- Complex Taxation: While you might save time on administration, having multiple LLCs under one EIN could make your taxes more complicated. It can be more difficult to distinguish the income and expenses of each LLC, which could complicate your tax reporting and potentially raise flags with the IRS.
- Reduced Business Autonomy: Each LLC under one EIN may not have the same degree of autonomy as it would if it had its own EIN. Decision-making and financial management may need to be centralized, which could limit the ability of each LLC to operate independently.
- Limited Business Growth: Having multiple LLCs under one EIN can potentially constrain business growth. If one LLC thrives, separating it or selling a stake can be challenging due to shared EINs. This shared identity can also complicate strategic maneuvers, such as spinning off a successful LLC or attracting investors. Therefore, if you plan and expect significant business growth, the shared EIN approach may present a notable limitation.
Your Guide to Having Multiple LLCs Under One EIN
Having multiple LLCs under one EIN can bring significant benefits by simplifying business operations and tax compliance. However, navigating the intricacies of this process can be challenging. And with potential legal liabilities that can affect your company’s overall performance, you would want to ensure full compliance.
With doola books, we offer customized solutions for businesses looking to manage their finances and streamline their workflows so that the technical stuff is taken care of. Contact us today to discover how we can facilitate your multi-LLC operations and keep your taxes balanced and up to date.
Do I need a new EIN when changing from LLC to Corp?
Yes, generally, when you change the structure of your business from an LLC to a Corporation, a new EIN is required, as the IRS views this as the creation of a new, separate legal entity.
Can I use my old EIN number for a new business?
No, each new business must have its own EIN. An EIN is specific to a single business entity and cannot be transferred or reused.
Do I need an EIN for an LLC with no employees?
Even if an LLC has no employees, it may still require an EIN for banking, tax reporting, and other business purposes. However, single-member LLCs without employees may use the owner’s Social Security Number (SSN) for tax purposes.
Can I edit my EIN information?
Yes, if there are changes to your business, such as name or address, you can update your EIN information by contacting the IRS.
Can you have multiple businesses under one LLC?
Yes, it’s possible to operate multiple businesses under one LLC. However, it’s important to note that the businesses will not be legally separate entities, which means they will share liability.