If you need an EIN for your LLC in North Carolina, don’t worry. The process of obtaining one is simple and free. But what is an EIN and why do you need one for your business? Find out why you need an EIN, how to apply for an EIN, and how to start your LLC off right in North Carolina.

What is an EIN?

Your EIN (Employer Identification Number) is like a business social security number so that the IRS recognizes your business for tax purposes. The IRS issues EINs for LLCs in North Carolina. Your EIN makes doing business in North Carolina and the US much more manageable.

Without an EIN, it is almost impossible to do the daily business of an LLC (even a single-member LLC with no employees).

Why Do I Need an EIN for my LLC in North Carolina?

Your EIN allows you to do many things that you can’t do otherwise, such as:

  • Open a business bank account under your LLCs name
  • Get a business credit card or loan
  • Apply for licenses and permits
  • File taxes
  • Pay your employees (if you have any)
  • Reduce likelihood of fraud

Suppose you have a single-member LLC and need no licenses or permits from your local or state government. In that case, operating a business without an EIN could be possible (but not advisable). You would pay taxes as an LLC in North Carolina and as a disregarded entity (sole proprietorship) with the IRS. If you are a sole proprietor with no employees who conducts business as an LLC, you do not need a separate EIN, unless you must file employment or excise tax returns. You can use your Social Security number to report taxes.

However, there are significant drawbacks to operating without an EIN. You don’t have a business bank account, and mingling money from your business with your own personal funds “pierces the liability veil.” In other words, your LLC would face possible liability if you mix your business funds with your personal ones.

In addition, you could quickly lose your limited liability status in a courtroom. A judge may not see your business as an LLC, even if you filed as one with the state. Without your LLC status, you could lose your business to a civil lawsuit.

How to Apply for an EIN

Applying for an EIN is simple and free. You can go to the IRS.gov site to apply online. After the IRS finishes validating your application, you’ll receive your EIN immediately. The process doesn’t take long, and then you can download, save, or print your EIN confirmation notice.

As soon as you receive your EIN, you can begin setting up your LLC with a bank account, credit cards, professional licenses, etc.

Tips for Setting Up Federal Tax Status for Your LLC

As an LLC, your business pays taxes to the IRS. The federal government automatically taxes you according to your member status.

  • If you’re a single-member LLC, the IRS automatically disregards your status as a business entity and taxes you as a sole proprietorship. You’re considered a “disregarded entity.” A sole proprietorship has no existence apart from you, the owner. You simply include the income and expenses of the business on
    your own tax return. 
  • As a multi-member LLC, the IRS automatically taxes your LLC as a partnership.

However, if you file Form 8832: Entity Classification Election, you can choose to pay taxes as a corporation. To file with the IRS as an S-corp, you’ll also need to file Form 2553: Election by a Small Business Corporation.(1)  Filing as an S-corp can have distinct tax advantages over filing as a partnership or disregarded entity.

Some LLCs also choose C-corp status. However, if you don’t fully understand how a C-corp works, you can face complex issues immediately. Starting a C-corp requires a great deal of knowledge about how corporations work. Consulting a business attorney is vital when choosing C-corp as your tax designation.

Setting Up State Tax for Your LLC

You can set up your LLC as a business with the Secretary of State. Then you’ll need to register with the state for taxes. Finally, you’ll pay taxes through the NCDOR site.

Depending on your business type, you may also need to pay municipality, local, and other taxes. You can check out the different additional taxes your LLC may owe here.

Final Thoughts

You need an EIN to do the daily business of your LLC in North Carolina. It’s simple to apply for and get started with your new business. You can do it all online for free through the IRS site. Then you’re ready to open a bank account, get licensed, and pay your taxes.

However, starting a business can bring challenges if you’re unsure what is next. Talking with an experienced business attorney in NC can help you understand the best next steps for your business.

We Can Help

As a North Carolina based law firm, Hopler, Wilms, and Hanna works with businesses and corporations across the state. We can help you form your LLC, handle your tax designation, raise funds, and grow in our state! Contact us today and find out how we can help your LLC get off to the best possible start!

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