I have heard pros and cons about getting an EIN for myself. I just filed for an LLC for myself (independent contractor) and some of the IRS documents said that single-member LLCs do not need to file an EIN. Which is fine.

However, my tax advisor said the main benefit that I would see using an EIN is that the EIN would be passed around to all my clients instead of my SSN--which is always good not to give out.

Is that much of a good reason to have an EIN? and would operating with an EIN have any side-effects for tax filings? (ie. a LOT of paperwork, record-keeping for wages, double-taxation etc.)
THANKS!


Also, does anyone recommend any "LLCs and small business taxes for Dummies" like books?

I've never heard of a con for an EIN - as far as I understand, its just a tax ID. It takes about 5 minutes to fill out the form and send it in. No biggie.

You've established your LLC which from a tax perspective is like a DBA but has the legal benefits of a corp. The EIN doesn't affect your tax status as an LLC.

(Standard disclaimer - I'm not a tax advisor. You should call the IRS. I've found that they're easy to chat with and very helpful - seriously.)

Get the EIN, you can even get one over the phone from the Gov't.
I am an LLC also and have not come across any negatives. In addition to not having to give your SSN to everybody you can also open your bank accts. with it and start establishing a business credit history with corporate credit cards.

jay

Getting an EIN is easy and fast. Many governmental offices will require one for their PO's to you as well. Yes, you can provide your social security number, but that is a recipe for identity theft.

Also, the EIN provides one additional layer of separation, should you sell or worst case close your business.

As others have said - no pain in getting an EIN.

http://www.irs.gov/businesses/small/articl...d=97860,00.html

I have a single member, disregarded entity LLC and use the EIN on my Schedule C.

What did you need to know about LLCs and taxes? If you disregard the entity (and most small biz people do), you just file Schedule C with your personal income tax like a sole proprietorship.

Thanks all for helping me! I got an EIN for me

yes, went to the bank recently to try an open a business account, and they wanted an EIN.

I agree, I think an EIN should be a mandatory thing, definately advisable.

I'm still researching how to run the financial end, so I also appreciate any advice.

Can you apply for a bank account without your S/N? just using the EIN?
Ultimately I will also talk with the bank about this.

I just faxed in paperwork to get my LLC yesterday, of course the main benefit to me, for the LLC is the protection, especially in the event of Frivalous lawsuits.

I don't plan on being sued or giving any ammunition for a suit, but that does not mean people won't try.

Especially given that I work in the automotive aftermarket, and performance/race cars that do and will crash, sometimes they just chase after however they can after an incident.
I don't make parts that would even be involved, but that never seams to matter in the eyes of many lawyers. I'm not really making money at anything yet, but before I fill a large order later this month, I wanted to start protecting my arse.

I'm a small operation, so I cannot afford a suit, and definately cannot afford to loose any personal assents, but none the less, I need to keep my assets, and the companies assets 100% seperate.

I have read that if you intermingle your funds with the companies funds, they can still go after you personally. So it is important that when you accept money from customers, it is not a check made out to you, but the company name.

So you have to be very clear with the books, and when payment is accepted from customers, I take it the payment should go directly to a bank account setup for the LLC. Maybe I'm being overly cautious or looking into this too much, but based on what I read this is what I'm inferring.

I'm not exactly sure what I should do when I want to pay myself, and extract money from the business account for my time, call it a labor payment in the books? I'm still trying to figure out the safest way to operate these transactions.

I plan to buy some parts and equipment in the companies name as well, I assume you must do this either with company bank funds, or a loan or credit card in the company name and EIN (hopefully none applied for with my S/N)

When applying for the bank account, or a small LLC loan, I'm hoping I can just use an EIN number, and not my SSN. I don't know if this is possible yet, or if these things would really matter given it came up in court.

I would definately recommend an EIN though, it would allow you to differentiate yourself from the LLC as much as possible (financially).

My .02, and thanks for any insight.

rwdr.net@gmail.com

I read this on Nolo.com as well

"This last exception is the most important. In some circumstances, a court might say that the LLC doesn't really exist and find that its owners are really doing business as individuals, who are personally liable for their acts. To keep this from happening, make sure you and your co-owners:

Act fairly and legally. Do not conceal or misrepresent material facts or the state of your finances to vendors, creditors, or other outsiders.
Fund your LLC adequately. Invest enough cash into the business so that your LLC can meet foreseeable expenses and liabilities.
Keep LLC and personal business separate. Get a federal employer identification number, open up a business-only checking account, and keep your personal finances out of your LLC accounting books.
Create an operating agreement. Having a formal written operating agreement lends credibility to your LLC's separate existence. "

Looks like it's time to think through an Operating agreement.

rwdr_llc

That's a lot of points. I'll try a few.

First off, don't be so sold on asset protection with a Single member LLC. Most of the current "asset protection" classes and programs are about as legit as the invention submission cr@p you see on late night tv. The lawyers do the work, you get your LLC, but if someone gets hurt for your negligence, they are coming after you and an LLC isn't going to do a thing for you. Your best bet is to get an umbrella insurance policy to cover everything. Don't believe the "Asset Protection" and "Nevada Corporation" people. Talk to a lawyer that handles business liability lawsuits and see what she/he says.

An LLC can insulate you from debt collectors, but because of that, you will not be able to get a loan in your LLC without you being personally liable. So you may be able to get a loan and use your EIN depending where you go, but its going to be your credit history they use to give you the loan. If you default they will come after you. Maybe after a few years when your LLC has its own credit history you will be able to get a loan without your personal backing.

An EIN is another issue. You can even get one for a sole prop. It's good to have for all the reasons mentioned. You will also need it if you ever have to put somone on payroll.

You also want your checking account to use your EIN and business name and you definitely want to run all your business transactions through this account. It's not required, but it sure makes your tax filing cleaner and easier.

As an LLC, the payments you make to yourself are not deductible and they do not have to be based on anything (i.e. time, labor). You can take money out and put it back in whenever you want. Usually money coming out is called a "Draw." You will be taxed on the profits of your business regardless of what you take out.

Hope that helps.

I just noticed that our state taxation department here in Virginia is replacing the sales tax ID number with the EIN. I think you can still submit sales tax without one but it seems things are going to a single number system, which is probably more efficient (at least for big brother to keep on eye on you).

Thanks that makes complete and total sense.
I agree 100% about a persons negligence, it doesn't matter what the title, you will be held accountable.

Makes sense about establishing a credit history as well, it will take a long time but I plan to do this.

I'm glad I'm starting this now, while I'm small and this is just a side venture, in a couple years I can see this getting a lot bigger, and I'm sure I'll have been glad to get the ball rolling now.

Thanks again for all your insight and experience,

Don
RWDR LLC

Well, an LLC will protect you from liability in that your personal assets are protected. Your business assets would be free game. However, if they find a loophole with your LLC filing or anything that you were supposed to do that is required in your state for your LLC, they'll go forward to void your LLC on the basis that you really are a sole proprietorship and try to go after your personal assets. Even if they don't get them, it's expensive. Get liability insurance - it's worth it.

This is exactly the loophole that will get your LLC voided:


No bank will give you a loan on your EIN just because you have an LLC. I have an LLC and have been in business for three years and I still have to sign that I am personally responsible for my debt and provide my SSN. Don't plan on NOT having to give your SSN for many years to come.


You are the owner. You can take a cash disbursement anytime you want. It isn't considered payroll because every cent you end up making is your 'payroll'.

NY is doing the same thing.