Should You Get a New EIN?
Are you looking to change your business model? Are you changing the structure of your company? Are you changing the owners of your company? Did filing errors with the application trigger the need to change the EIN? Traditionally, when starting a new business, your team will need to apply for an Employer Identification Number (EIN). These nine-digit numbers are assigned by the IRS to help identify your business and track employee taxes. EINs do not expire, but in some scenarios, it may be in your best interest to change your EIN. Here we will go over some of the pros and cons of getting a new EIN. In some cases, it may be necessary, and in others, it may be in your best interest. In any case, be sure to discuss the options with your tax professional before applying for a new EIN.
Pros:
New Structure: Changing the structure from a Sole Proprietor or Sole Member LLC to a partnership will often require a new EIN. This provides a separation from the old single owner structure.
Clear Separation: If you are changing your business model, a new EIN can again provide a separation from your old and new business activities.
Tax Benefits: Based on your accountant’s advice and your situation, a new EIN can offer tax advantages.
Protection: Forming a new company such as an LLC or Corporation as opposed to a Sole Proprietorship can provide Liability Protections, which will help you secure your personal assets. With the new company, a new EIN is standard practice.
Growth: You may be looking to expand your company and add additional services and locations. Based on your accountant or attorney’s advice, it may be beneficial to update your EIN or business structure to accommodate this growth.
There are cons to changing your EIN as well. You will want to consider these challenges when determining to take the steps of changing your EIN.
Cons:
Hassle: Applying for a new EIN does involve completing the proper paperwork. It also takes time for the IRS to issue the number and provide confirmation of the number. Your bank and/or vendors may need confirmation of the new EIN once completed.
Tax Implications: As with any IRS filings/changes there may be tax implications tied to this change. It is best to consult your tax professional to ensure you are taking the proper steps.
Credit: Any changes to the EIN will affect the business credit. The company EIN is often compared to a Social Security Number for the business and is often used in credit applications and to ensure your credit history.
State and Local Regulations: Your federal EIN may tie to your state and local licensing. With the change you may have to notify these authorities and comply with new application procedures.
Confusion: Your vendors, shareholders, banks, and lenders may require information on this change. This can cause miscommunication, misidentification of your company and other administrative complications.
The Employer Identification Number is an important piece to your company. If you think that applying for a new EIN will benefit your business, it is important to speak with your attorney or tax professional regarding the best way forward. If we can be of any assistance with company registration requirements, we are always happy to assist. Harvard Business Services, Inc. is your proven destination for Delaware company registration.
*Disclaimer*: Harvard Business Services, Inc. is neither a law firm nor an accounting firm and, even in cases where the author is an attorney, or a tax professional, nothing in this article constitutes legal or tax advice. This article provides general commentary on, and analysis of, the subject addressed. We strongly advise that you consult an attorney or tax professional to receive legal or tax guidance tailored to your specific circumstances. Any action taken or not taken based on this article is at your own risk. If an article cites or provides a link to third-party sources or websites, Harvard Business Services, Inc. is not responsible for and makes no representations regarding such source’s content or accuracy. Opinions expressed in this article do not necessarily reflect those of Harvard Business Services, Inc.