ForumsStarting a Business

You will find what you're looking for here:

http://www.irs.gov/businesses/small/article/0,,id=158625,00.html

"A single member LLC (SMLLC) can be either a corporation or a single member "disregarded entity". To be treated by the IRS as a corporation, the SMLLC has to file the Form 8832 and elect to be classified as a corporation. An SMLLC that does not elect to be a corporation will be classified by the IRS as a Disregarded Entity which is taxed as a sole proprietor for income taxes."

Why did you go the LLC route as opposed to a corporation?

As GrowthCurve quoted, the LLC is taxed by the IRS as a pass-through entity (same as a sole proprietorship) unless you elect for it to be taxed as a corporation. So like a sole proprietorship, you can operate on just your SSN. However . . .

Since you went to all the extra expense and trouble to form an LLC instead of sole proprietorship in the first place, I'd assume there are reasons (that either now or someday involve the business entity being legally separate from you personally). So the business really needs its own identification number -- i.e., the EIN.

My suggestion is to apply for one now (you can do it on-line in minutes), and start using it in all situations for the business entity. As a single member LLC, you will still have to provide your SSN along with the EIN (e.g., to the bank, creditors, etc.) -- but unless the business has an EIN, it's just an extension of you for all practical purposes (in which case, you might as well have formed a sole proprietorship).

Hope that helps. Welcome to the community and best wishes.

So, all I need to do is complete and send the SS-4 form, stating that my LLC is a "diregarded entity" and therefore, will be taxed as a sole properietorship? Are there any other form I need to be concerned with the LLC? I will be operating a Skincare Lounge offering services and in the near future, retail products in the state of North Carolina.

By the way, thanks for your help and warm welcome to the community.

Being taxed as a sole proprietor is not a bad thing. Since she is a single member LLC, her only alternative would be to be taxed as an S corp (or C corp). Being taxed as an S corp may be beneficial, but it depends on the nature of your business. If you do conclude that being taxed as an S corp is more advantagous for your situation, you do not need to create an corporation. Rather, you can elect to have your LLC taxed as an S corp. You should hire a qualified tax attorney to advise you on the best tax regime for your business.

Note that even if your entity is disregarded for tax purposes (i.e., taxed as a sole proprietorship), it is still a legal entity under state law and you will have the liability shield that your state's law provides.

As for an EIN, beginning in 2009, even if your LLC is disregarded for tax purposes, you will need an EIN for all employment tax purposes. So, you should go ahead and file the SS-4 now if you are going to have any employees.

If you're opening a bank account for your LLC, the bank would require a tax ID/EIN number. Any bank loans will also reflect that. You can apply online easily and the form guides you by asking you the right questions about your business. To be taxed different than a disregarded entity, there's an option to later file another form with the IRS. This is where a good accountant can guide you. Also, for the type of business you're starting, you would definitely want to talk to an attorney about possible legal ramifications to avoid when dealing with clients and employees.

-Cheryl-
www.IsaacBusinessServices.com