An Employer Identification Number is needed to operate any business that will require you to hire employees. Your EIN will be used by the federal government to track your business and collect any taxes that are owed. The IRS has made recent changes that may require you to file for a new EIN number. It will depend on what type of legal classification your business falls under. The different legal classifications of a business entity include:
- Limited Liability Companies (LLCs)
- Sole Proprietorships
Do I Need a New EIN?
A new EIN is needed any time a new business is established that will have employees. There are times when a sole proprietorship will also need an EIN even if they have no employees. Part of the reason an EIN is so important is that it helps to define interactions between the business and the IRS. A business owner may be changing the structure of the business.
Situations Where a New EIN Won’t Be Needed
Changing the name of a business or its location will not require a new EIN number. If you file bankruptcy for your business, you will be able to continue to use the original EIN. In most cases, changes made within the management structure or ownership of a business will not require you to file for a new EIN. If these adjustments in management lead to a change in the business’ legal classification, you may need a new EIN to be able to effectively operate your business as a different entity.
Canceling Your Old EIN
As soon as you apply for your new EIN, you will no longer be able to use the old one. Even though a new EIN is in place, the account for the old number will still be active. It is up to you to close the account and cancel your old EIN. In most cases, all that will be needed to close the account and remove your previous EIN is a letter detailing the reasons for the change and a request to eliminate both the account and the old number.
Applying for a New EIN
All you need to file for a new EIN is the IRS Form SS-4. You can also call the IRS or file the SS-4 online and obtain your EIN in a matter of minutes. The process is incredibly simple and will only take a few minutes of your time. It will probably take longer to write a letter to cancel your old EIN and account than to open your new one. Opening a new business or altering an existing one can require another EIN. Understanding the new guidelines that may require you to obtain a new EIN is important if you want to stay on top of your responsibilities. If you have questions about when a new EIN is needed, there are many ways to get answers. Even lenders that work with small business owners can help you stay on top of these changes and the new guidelines you have to follow.