When starting a business, there are many reasons to choose a limited liability company (LLC) as your entity type. Having an LLC Tax ID number gives you lots of flexibility when it comes to how you operate your business. There are not as many rules when it comes to record keeping and business meetings. Of course, the biggest advantage to registering for your Federal Tax ID number as an LLC comes at tax time. An LLC designation protects you as an individual from being held liable for the company’s debts. It also protects you from double taxation, like an S-corporation entity type does.
The advantages of incorporating as an LLC, as opposed to another type of business entity, are obvious. So, when is the right time to register your LLC?
Getting a Federal Tax ID Makes Your Business Official
The best answer to the question of when to register your LLC is as soon as possible. You really cannot do any official business without it. Another reason not to wait to register your LLC is that there cannot be two LLCs with the same name in the same state. This rule should be an incentive to register your LLC sooner rather than later. Another incentive is that you cannot open your bank account for your business until it has a Federal Tax ID number.
Getting an employer identification number (EIN) for your business can be very quick. Once you fill out an EIN application online, the IRS-EIN website will send you an email containing your EIN that same day. Within a month, you will get an official confirmation letter in the mail from the IRS, also containing your EIN.
If you are opening an LLC, it is never too soon to get an EIN for it.