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Can I Use My Previous EIN for a New Business?

Whether you are an entrepreneur or small business owner, there are certain tax considerations that you would have to make while starting your new business in the US. One of the important aspects of any new business is obtaining the right tax ID. Depending on the type of business and requirements as specified by the Internal Revenue Service (IRS), you can transfer EIN or apply for a new employer identification number. Transferring an Employer Identification Number (EIN) refers to the ability to use an existing EIN from an earlier business for fulfilling tax obligations of your new business.

Introduction to EIN for New Business

An EIN or employer identification number or Federal employer identification number (FEIN) is normally assigned by the Internal Revenue Service (IRS) to new businesses that are formed or registered in the United States. The primary purpose of assigning this nine-digit unique number is to identify the tax liabilities of the entity. Normally, when you are forming a business, you will need to apply for a new EIN but in special scenarios for LLCs and partnerships; you can transfer EIN and use it. This article has been created to provide you with information pertaining to when you can use your previous EIN, when a new EIN is required, and the type of business entity it is applicable to and much more.

EIN for LLC

A Limited Liability Company (LLC) is a type of business entity that is created by state statutes. Does this mean you need to apply for a new EIN for the LLC? In order to understand whether you need a new Employer Identification Number or can use an existing EIN, you have to identify the tax election of an LLC.

Do I need a new EIN for an LLC?

If you are planning to start a new business and the entity being formed is a Limited Liability Company (LLC) then you will need to apply for and obtain a new EIN. In fact, most forms of new businesses have to obtain an Employer Identification Number (EIN). There are certain special conditions that determine whether your business entity needs to apply for a new EIN or not. These special conditions include:

  • If your single member LLC is considered by the IRS as a disregarded entity then the income tax return will be filed by the owner using a Social Security number (SSN). In such a scenario, you don’t actually need an Employer Identification Number but if you want then you have to apply for a new EIN.
  • If you have a multi-member LLC or an LLC with more than a single owner then you will require a new EIN
  • If a new LLC with a single owner chooses to be taxed as an S Corporation then a new EIN will be required
  • If a new Limited Liability Company has excise tax or employment tax filing requirements then a new EIN will be required.

There are also some cases in which you can transfer EIN. Some of the special situations where you will not be required to apply for a new Employer Identification Number include:

  • If you convert a partnership firm to a limited liability company
  • If you change the name of your existing LLC
  • If you change the location or primary work address of your limited liability company

Planning to start an LLC? Apply for a new EIN today!

EIN for Corporations

An Employer Identification Number (EIN) is required for most common forms of businesses including C and S Corporations. According to the Internal Revenue Service (IRS), there are specific situations or conditions where a corporation will be required to apply for a new EIN and where they will not.

When a new EIN is required for a corporation?

A business corporation is a corporate structure that has several advantages including tax advantages. It operates as a separate legal entity and the profit is taxed to the corporation. A business corporation is required to pay income tax, estimated tax using form 1120-W, different employment taxes, and excise taxes. If you are planning to start a corporation, you will have to apply for a new EIN in the following scenarios:

  • When a business or private corporation receives a new charter from the office of the secretary of state in the state of its incorporation
  • If you own a subsidiary of a corporation or are planning to become a subsidiary, you will not be able to use the parent corporation’s EIN. You will be required to apply for a new EIN.
  • If you change or convert your corporation to a partnership entity or a sole proprietorship
  • If a statutory merger has led to the creation of a new corporation

When you don’t need a new EIN for a corporation?

There are several exceptions to the rule of application of EIN or to transfer EIN. There are certain circumstances in which a Corporation is not required to obtain new Employer Identification Number (EIN) and they are:

  • If your business is a division of an existing corporation then a new EIN is not required
  • If after a corporate merger, the surviving corporation plans to use the existing EIN
  • If a business corporation declares bankruptcy
  • If the name of the business corporation or its location changes then there is no need to apply for new EIN
  • If an existing corporation elects S corporation tax status
  • If a business corporation undergoes conversion at a state level wherein there is no change to its business structure

You can obtain a new EIN for your Corporation today!

EIN for Partnership

A partnership is a type of business structure that is owned as well as operated by several individuals. A partnership business entity consists of two types, which are general partnerships and limited partnerships. A partnership entity is required to file a “U.S. Return of Partnership Interest” tax return and in order to do so; they have to apply for a new EIN.

When a new EIN is required for partnership?

If you have started a partnership or are planning to register one then in the following scenarios, you will be required to apply for a new EIN.

  • A partnership entity by law requires one to pay taxes and hence when you form such an entity, you will have to obtain a new EIN
  • If your existing partnership transforms from a partnership into a sole proprietorship where the owner was one of the partners.
  • If you incorporate
  • If you end an old partnership and establish a new entity then you will have to apply for a new EIN

When you don’t need a new EIN for Partnership

There are certain scenarios in which you are not required to obtain a new EIN or can transfer EIN and they are:

  • If there is a change in the name of the existing partnership
  • If the said partnership declares bankruptcy
  • If you add new locations or addresses for the partnership or change existing location
  • If a new partnership is formed post termination of an existing partnership under IRC section 708(b)(1)(B)
  • If 50 percent or a higher percentage of the partnership ownership changes hands within a year or 12 month period

EIN for Sole Proprietors

A sole proprietorship business is owned and operated by an individual and is considered to be an unincorporated business. Sole proprietors can file their income tax return using SSN but they can also apply for a new EIN for filing returns.

When is a new EIN required for a sole proprietorship?

An employer identification number (EIN) is not mandatory for sole proprietors although there are certain scenarios in which they may be required to apply for a new EIN. The scenarios are:

  • If your business takes in partners and operates as a partnership entity
  • If the sole proprietorship is subject to any bankruptcy proceedings
  • If you incorporate a sole proprietorship then you will be required to apply for a new EIN
  • If you inherit or purchase an existing business, which is also operated as a sole proprietorship

When don’t you need a new EIN for sole proprietorship?

There are specific scenarios in which a sole proprietorship will not be required to apply for a new EIN and they are:

  • If you operate several or multiple businesses
  • If you change the existing name of your business
  • If you change the address of the sole proprietorship

Transferring an EIN to a new Owner

You have started a business and obtained an EIN but now the same company is going to have a new owner. The question that most business owners ask in this situation is whether it is possible to transfer an EIN to the new owner.

Can I transfer my EIN to the new owner?

The Employer Identification Number (EIN) is a unique nine-digit number that is assigned to business owners or businesses by the Internal Revenue Service (IRS). Generally, each new business being formed or incorporated in the US needs to apply for and obtain this tax ID number. At some point in time, business owners come face to face with the question of whether it is possible to transfer an EIN to a new owner if their business has been taken over or bought by another owner or company. In such a scenario, you will not be able to transfer the EIN as the new owner has acquired the business and will have to apply for a new Employer Identification Number (EIN).

What happens when a business owner dies?

Generally, if a business has new ownership, then according to the IRS, the new owner has to apply for a new EIN. In the event of death of a business owner, whether a new EIN is required or you can transfer an EIN will depend purely on the type of business entity. One such type of entity is a business corporation. If the owner of a corporation dies then such a business remains in perpetuity as long as there is a succession plan. In such a scenario, there will be no requirement for applying for a new Employer Identification Number (EIN).

On the contrary, if you were to inherit a sole proprietorship business where the previous owner has died then you will have to apply for a new EIN. Similarly, in a partnership business or Limited Liability Company, if the owner, partner, or member dies then the business is dissolved and hence you cannot transfer the EIN.

How do I apply for a new EIN?

As a business owner or if you start an LLC or a corporation or partnership, obtaining an Employer Identification Number (EIN) will require you to submit a completed Form SS-4 to the IRS. You can submit the application using various methods like submitting online, through phone or fax, and email. Alternatively, you can save your time and apply for a new EIN online through IncParadise.

Need any assistance in getting a new EIN?

An Employer Identification Number (EIN) is an important part of any business operations as this unique number not only identifies the type of business but also helps in filing of tax returns. If you are a business owner or plan to form a new business then you will require someone to provide you with expert guidance in the matters related to applying for and obtaining an EIN. This is where IncParadise can help you because we have a team of experienced and committed professionals ready to answer any queries you may have pertaining to applying for a new EIN.

IncParadise has streamlined processes that are targeted at ensuring that we are able to provide a host of additional services. Through these varied services businesses will be able to benefit from ease of applying online for incorporation to managing several aspects of overall working of a business including applying for a business license, submission of annual reports, and acquiring a Certificate of Good Standing among others.

Do you want to apply for a new EIN for your business?