should I get an EIN for pass thru LLC?
I have sent in the paperwork to form an LLC, and was looking at the SS-4 form to get an Employer ID number. If I want to have the LLC be a pass through entity, should I get an EIN? If so, does anyone know which box I should check for type of entity (sole proprietor or corp)?
Thanks!
Ted
Not sure if this is the ideal -- but the legal advice I received for the type of LLC I wanted to set up was to go ahead and get the EIN (makes the company seem one step further away from the individual when someone tries to pierce the corporate veil) AND get a separate checking account under the EIN AND make sure that you have Annual Meetings and Minutes and all that fun stuff. Make it look official and it will be easier to defend it as being that way.
The box that my lawyer checked on the SS-4 (in section 8a) was "Other (specify)" and listed "LLC taxed as partnership".
I did some light reading and found out that you can set up your LLC to be taxed as a partnership (income from 1065 gets passed down to the owners or "members" individual income tax return) OR as a corporation. It sounds like you want the former.
Disclaimer: I am NOT an attorney and this is only the advice that I was given for the company I wished to set up. Of course, I would recommend you consult an attorney in your state for how best to set up the type of LLC YOU want.
Thanks for the reply--one question: are you in a partnership with someone else, or did your lawyer just check that box for some other reason?
Ted
[quote]
On 2003-03-14 19:17, Ted wrote:
I have sent in the paperwork to form an LLC, and was looking at the SS-4 form to get an Employer ID number. If I want to have the LLC be a pass through entity, should I get an EIN? If so, does anyone know which box I should check for type of entity (sole proprietor or corp)?
Ted,
The answer depends on whether or not you have another partner in the deal. If there are 2 or more owners to the LLC, the default rule under the Internal Revenue Code is the LLC is taxed as a partnership (flow-through entity). In that case you WILL have to get an EIN, because the LLC must file its own tax return (a Form 1065 partnership tax return).
If the LLC elects to be taxed as a C or S corporation (yes, it can elect to be taxed as a S corporation by filing IRS forms 8823 (check the box election form) and 2553 (S corp election form)), and you will need to fill out a IRS Form 8823 along with making the appropriate indication on the SS-4. However, I would almost never elect to have the LLC that is owning real estate elect to be taxed as either a C or S corporation because of some adverse tax consequences when you try to get the real estate back out.
If you are the only owner of the LLC interests, and you do not make a check the box election on Form 8823, the LLC will be disregarded for federal tax purposes, but not for state liability purposes. In that case, you can use your own Social Security number and do not have to fill out a SS-4 unless you will be having employees (because they you need the EIN to account to the IRS for filing payroll taxes). In this case you would check the "sole proprietor" box. Since most REIs do not have employees in their LLCs (including themselves), the SS-4 is not needed and so which box to check is irrelevant.
Hope that helps,
Taxjunkie[ Edited by taxjunkie on Date 03/23/2003 ]
There are two members total to the partnership, myself and my wife -- so I guess that is why it was set up that way.