You may need to get an Employer Identification Number, or EIN, for a new Washington State limited liability company so you can open a bank account and file federal income and payroll tax returns.
Unfortunately, the process for determining if a Washington state LLC needs an EIN is little complicated due to the loose-y goose-y nature of LLC tax accounting. But let me explain.
Note: Remember that an LLC’s owners are called “members.” I’m going to be using that term in the paragraphs that follow.
Usually Multiple Member LLCs Treated as Partnerships
Except in the special case where an LLC’s only members are a husband and wife residing in a community property state (like Washington state), multiple member LLCs engaged in a profit-seeking enterprise probably always need an EIN because they need to file a partnership income tax return for the LLC.
The federal 1065 partnership tax return, this is maybe obvious, needs that EIN for the 1065 income tax form including the K-1s that goes to the Internal Revenue Service and its partners.
Exception for Washington State Husband and Wife LLCs
The rules may work a bit differently for a husband-and-wife-only LLC if both spouses reside in a community property state.
In this situation, the couple may treat the multiple member limited liability company as a single member limited liability company–in which case the single member limited liability company rules (discussed next) apply.
Single Member LLCs Treated as Sole Proprietorships
If you own a single member limited liability company and you’re planning to have the LLC treated as a sole proprietorship for income tax purposes, you need an EIN only if you are subject to a bankruptcy proceeding, hiring employees or purchasing or inheriting an existing business.
Note that you don’t need an EIN for other purposes if your LLC will be treated as a sole proprietorship for tax accounting purposes. In other words, you don’t need an EIN if you change your business name or location or if you operate multiple businesses or in multiple locations.
LLCs treated as C or S corporations
Accountants and attorneys often love LLCs because the LLC’s owners can choose to treat the LLC as a corpoation for income tax accounting purposes. And that situation also effects EIN requirements.
No matter what, if you choose to have an LLC treated as a either a regular corporation or a Subchapter S corporation, you will need to get an EIN in almost all cases.
Note then that if you have a single member LLC and you’ve elected to be treated as an S corporation, that simple election means you need an EIN.
And if you and your spouse together own an LLC but you’ve elected to be treated as a corporation, you need an EIN even though you two guys are the only members and you both reside in Washington state.
In the corporation or S corporation examples, the LLC needs an EIN so it can file a corporation tax return.
Applying for an EIN
I’ve posted a long-ish blog entry about how to use the Internal Revenue’s online EIN application process here, but you may also be able to get an EIN simply by calling (800) 829-4933 Monday through Friday between 7am and 10pm.
If you can get ahold of the IRS via telephone, an operator will step you through the process of applying.
One suggestion: The IRS strongly recommends that you first download and complete the SS-4 (click here to get to a copy of the form and here to get a copy of the form instructions.)
And a silly note: You do need to have your LLC set up first before applying for the EIN.