If you run a business or are investigating ways to navigate the IRS tax system, you may be asking yourself, “How many EINs can I have?”. The short answer is that one EIN is allowed per legal business entity. This means if you have a company with multiple business entities, you can have as many EINs as there are entities.
Although this is the quickest way to answer questions you may have about having multiple EINs, it is slightly more complicated than that, so let’s get into it in a bit more detail.
What is an EIN?
An Employer Identification Number (EIN) is a nine-digit number allocated to a business. EINs are legally required for corporations and partnerships or any company that has taken on employees. It’s an essential piece of information for letting the IRS know about your income and helps with processes like payroll and employee pensions. If there are any tax benefits your business may be entitled to, you will also need to supply your EIN to claim these.
Basics of Employer Identification Number
The best way to think about an EIN is like a Social Security Number (SSN). The difference is that EINs are assigned to businesses and not to individuals. They do, however, play the same role in the US tax system in that they keep track of business earnings, ensure tax returns are filed correctly, and help the IRS correctly identify businesses and their essential information. Businesses also use it to open up business bank accounts and start establishing business credit.
Situations Where Multiple EINs Might Be Needed
It’s important to remember that only one EIN is allowed per business entity. However, there are circumstances under which businesses can have multiple entities. As a business owner, you may also have multiple businesses in your portfolio. Below is a more comprehensive breakdown of the situations in which you may be entitled to multiple EINs.
Owning Multiple Separate Businesses
It’s possible to own multiple businesses and register them under one legal entity. If this is the case, you cannot apply for multiple EINs. However, when you set up your businesses separately, meaning they operate as completely separate business entities, then you need to have one EIN per legal entity. That means each entity will file separate tax returns and will be viewed as a company on its own.
You do not need to apply for multiple EINs if the divisions in your business are operational under a single legally registered business entity. In this case, you just need one.
Changing Business Structure
There are some cases in which businesses change their business structure. For example, you may see benefits in changing your business from an LLC to a Corporation, or you may expand your own business into a partnership. Either way, once the legal structure of a company changes, a new EIN will be required.
You, therefore, have to apply for another one. If you do this, the old EIN registered to your previous business structure will become redundant and will, therefore, need to be retired. To avoid any issues, you should ensure that the IRS is fully aware of the change and ask them to confirm that the old EIN has been deactivated on their system.
Company Acquisitions or Mergers
In the event of a company acquisition or merger, a new EIN may be required if the legal entity of the company has changed in name, capacity, or structure. An EIN is registered to a company name or address. While an expansion does not necessitate a new EIN, structure changes will.
For example, changing from a small business to a partnership or corporation will entail getting a new EIN for your business. Similarly, if a larger corporation acquires a company, it must retire its old EIN. If the acquirers decide to keep the company as a separate legal entity, they will need to apply for a new EIN for that company, as it still constitutes a change in the company’s structure.
Can One Business Have Multiple EINs?
There is no limit to the number of times you can request a new EIN. However, you must ensure they are requested for separate entities or new business structures. It is a common misconception that a company name change means that you need to have another EIN. This is incorrect. You can change your business name without changing your EIN. The same goes for registered business addresses. These can be changed without retiring your EIN.
There are also some challenges you might face when you try to get multiple EINs. There is a confusion risk if you are applying for multiple EINs or requesting a new one after a change in business structure. There is also extensive paperwork associated with getting multiple EINs, which can take a lot of time.
Applying for a single EIN can take around 30 minutes when you use the online service, so applying for multiple is time-consuming. The IRS is also very strict in classifying separate business entities. Therefore, you have to ensure that all your documentation is in check when you apply for multiple EINs.
The Process of Applying for Multiple EINs
When you apply for multiple EINs, you must ensure that you do this on separate days, especially if you are the individual doing the applications. The IRS will only issue one EIN per applicant per day. You can also only apply for different EINs if they are for completely separate business entities or if the structure of a company has changed.
If you are applying for another EIN because a company structure has changed, you will also need to make sure that the EIN for your old company is completely retired or deregistered. This will help you to avoid confusion with the IRS further down the line. You should also make a note that the old EIN is no longer valid.
Potential Drawbacks and Considerations
When businesses have multiple EINs, there may be some complexities encountered. If you have multiple EINs, you need to ensure that your filing and administrative systems are up to date so that you don’t get confused between the entities when filing tax returns or reports. If this happens, you will be placed under heavy scrutiny from the IRS, even if any mistakes were completely innocent.
You may also need to manage separate bank accounts for your different businesses. If you have multiple EINs, you should consider hiring a professional to assist you with all your financial and tax affairs.
Conclusion
We’ve learned that there is no limit to the number of EINs you can have. It’s important to understand the citations in which multiple EINs are allowed. The best way to think about it is one legal business entity means one EIN. If you use this train of thought, you are unlikely to encounter issues.
You will also need to get a new EIN if there are any changes in your business structure. If you are considering applying for more than one EIN, you can also consult a tax professional for assistance in the matter. Always ensure that you are certain you need another EIN before submitting an application for an additional one.