If you already have an employer identification number (EIN) for your business but have recently made some changes, you may be wondering, “Do I need a new EIN?” Depending on the type of business entity and the circumstances, the IRS may require you to apply for a new federal tax ID number.
In today’s post, I’ll break down the different situations where you are required to apply for a new EIN, as well as, cover the situations where one is not required.
When Do You Need a New EIN Number
A new EIN is required if any of the following statements are true:
- A new corporation is formed with the Secretary of State.
- A corporation is a subsidiary of a corporation using the parent’s EIN, or the corporation becomes a subsidiary of a corporation.
- A corporation changes to a partnership or a sole proprietorship.
- A new corporation is created after a statutory merger.
A new EIN is not required under the following circumstances:
- The surviving corporation uses the existing EIN after a corporate merger.
- A corporation declares bankruptcy.
- The corporate name or location changes.
- A corporation chooses to be taxed as an S corporation.
Limited Liability Companies (LLCs)
A new EIN must be obtained if:
A corporation files papers with the state to convert to an LLC and will use the default tax classification of partnership. In this situation, the corporation is considered liquidated.
The IRS does not require an LLC to apply for a new EIN in the following situations:
- A corporation files papers with the state to convert to an LLC and will elect via Form 8832 to be taxed as a corporation.
- The number of members in the LLC changes from more than one member to a single member (i.e., changes from a multi-member LLC to a single-member LLC).
- The number of members in the LLC changes from a single member to more than one member (i.e., changes from a single-member LLC to a multi-member LLC).
- A sole proprietor files papers to become a state-recognized entity, organizes as an LLC, and will file Form 2553 or Form 8832 to elect to be treated as a disregarded entity or taxed as a corporation or small business corporation
If any of the following statements are true, the IRS will require that the business owners obtain a new EIN:
- The partners incorporate the business.
- One of the partners takes over the partnership and operates it as a sole proprietorship.
- The partners end the partnership and begin a new one.
A new EIN is not required to obtain a new EIN if any of the following statements are true:
- The partnership declares bankruptcy.
- The partnership changes its name.
- The partnership changes its location or adds other locations.
- A new partnership is formed due to the termination of a partnership.
- Fifty percent or more of the partnership’s ownership (measured by interests in capital and profits) changes hands within a twelve-month period.
The IRS requires a new EIN if any of the following statements are true:
- The sole proprietor is subject to a bankruptcy proceeding.
- The sole proprietor incorporates the business.
- The business owner takes in partners and operates as a partnership.
- The business owner purchases or inherits an existing business and will operate as a sole proprietorship.
A new EIN is not required if any of the following statements are true:
- The sole proprietor changes the name of the business.
- The business changes its location or add other locations.
- The sole proprietor operates multiple businesses.
How to Cancel an EIN
Businesses will no longer use their existing EIN after requesting a new one in some of the situations above. Typically, that will mean the tax account associated with that EIN must be closed. Business owners should discuss this with their accountant or tax advisor. Generally, a letter to the IRS explaining the reason for closing the account associated with the EIN will suffice.
How to Apply for an EIN
While it’s relatively simple to request a new EIN via IRS Form SS-4 (“Application for Employer Identification Number”).
You can save time and feel confident it’s done correctly by asking CorpNet to file your EIN application. Reach out to us today to get started!