Irs EIN Number For Llc
March 20th, 2007
Question: Trying to obtain My EIN Number?
When going for My EIN Number online it (IRS) asked how many members. I said 2, and it said that being its a multi-member L.L.C. that they (IRS) had to to initially set up as a partnership. Don’t want to do a partnership. I did select LLC in the beginning of the application.
Does it say that cause it has to set it up as a partnership for right now?
Answer: Your limited liability company will remain a limited liability company. The EIN doesn't effect the legal classification of your business entity, it merely identifies the tax classification for the preliminary purpose of sending you applicable tax forms for your convenience so you don't have to get them on your own. It is not even a tax election which you will make based on the type of tax return you end up filing for the LLC.
For an LLC, it is generally desirable to elect to be treated as partnership or disregarded entity for tax purposes because the IRS will not subject the LLC itself to income tax. Otherwise you would get taxed twice by the IRS for any income the LLC makes, once on the entity level when the LLC makes income and again as personal income tax when the LLC passes the income on to you and the other member. If classified as a partnership by the IRS, income tax is only assessed against you as personal income tax and reported as such on Schedule K of your personal income tax return.
Edit: There are several legitimate reasons for forming a limited liability company to operate one's business, most of which revolve around the concept of protecting one's personal assets against the liabilities of the business. One doesn't need to have a "huge operating corporation" to expose one's personal assets in operating a business outside of a limited liability entity. All it takes is one engagement with a client or customer. Further, the costs of organizing a limited liability company with equal membership interests are nominal outside of certain jurisdictions like New York.
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