For a single member or sole owner LLC there may be no need to have a federal tax id however if there are more than one members and/or employees involved than the LLC will have to have a federal employer identification number, also known as a FEIN which is their tax id for LLC. Form SS4 must be filed with the Internal Revenue Service to obtain this number. In addition, it might be necessary for the LLC to apply for a state tax id number as well. Each state’s laws are different and there might be different ways of obtaining this number.
The tax id for LLC will make sure that the right amounts of taxes are being levied against the company. There are many tax considerations with LLC, including whether or not the IRS recognizes them as entities or not. It is advisable to speak to an attorney or an accountant (possibly both) who can advise you on the best way to fill out the SS4. There are some conflicting reports about which is correct with some saying that you fill it out and check the partnership box for that question while others say that you should use other and fill in the words “disregarded entity” instead.
Because taxes can be such a huge part of a business’s financial life, it is important that the right forms be filled out and correct and that the right amount of taxes be assessed for each business. In addition, because a LLC is often comprised of many members, you want to be sure that everyone is paying their own fair share of these taxes. The amount of profits that are distributed as well as taxable amounts, etc., should be set forth in the LLC operating agreement which is also filed with the IRS.
The tax id for LLC is simply an identifier, a way of tracking the business. Just like there are many uses for your own personal social security number, there are many uses for the FEIN. For instance, it can be used to establish business credit for the LLC, open bank accounts that are drawn on its name and other related business factors. The LLC tax id is good for many things; however it is important that someone file for it before the business opens its door. It will be necessary especially if there are employees who will need this number to file their own taxes at the end of the year.
If you have worked for someone else in the past, you have seen the FEIN on your own W2 form. It is in the box that is marked employer identification number, or employer tax id. It is an important number for a lot of reasons, not only for yourself but for your employees and the members who are counting on you as well.