Single Member LLC's, EIN Numbers, and Entity Classification Elections.. OH MY!

**fkj** · 02-26-2009 08:48 AM

The more I read the IRS, Sec. Of State, and Local Dept. of Rev. websites, the more confused I get! I am wanting to incorporate my web business, but I'm not quite sure what I need to do.

I am the only one running the business, and I don't plan to have any employees or partners, so I would think a Single Member LLC (SMLLC) would be the best option?

I plan to open a bank account and seek funding for the business, so I would think I need to have an EIN Number for that instead of my SSN, correct? Would I be taxes twice since I need to file taxes for the company and myself?

If I don't need an EIN since there is only one member? How does this effect my companies ability to build corporate credit? Or am I confusing the EIN with the Tax ID Number?

Whats this with the Entity Classification Election? After I file the SMLLC paperwork with my state, I need to then file this ECE with the IRS?

Why is this so damn complicated? Is there a credible and experienced service that will do all this?

Thank you for your help!

Fred

**paul2145r** · 02-26-2009 10:02 AM

With a single member LLC, you are only taxed once. When you do your personal taxes, you will file an additional form that shows the profits/losses/etc for the business.

If you need help, send me a PM, or use one of the corporation filing services online. Good luck!

**fkj** · 02-26-2009 10:11 AM

Thanks, Paul.

What about the EIN Number / Tax I.D.? Are they the same? Do I use my SSN with a SMLLC? How does this effect the ability to build corporate credit?

**pboychuk** · 02-26-2009 11:54 AM

EIN is identifier for federal taxes, Id is state.
I use my EIN w/ SMLLC, otherwise you will mix your personal and business finances

**mthomas** · 02-26-2009 04:01 PM

I think filing for an S-Corp would be your best bet. You get to enjoy unlimited liability while also having the same tax benefits of an LLC.

LLCs are often better for businesses with more than one member. Since you are the only member, S-Corps are probably a better bet. Additionally, it is a lot easier to sell shares of a corporation (non-voting shares) than to sell % ownership of an LLC when seeking funding.

By incorporating, you automatically get an EIN/Tax ID since a corporation is considered a separate entity.

In regards to building corporate credit, here is an extremely helpful link.

**BusinessAdviser** · 02-26-2009 08:01 PM

Originally Posted by mthomas

I think filing for an S-Corp would be your best bet. You get to enjoy unlimited liability while also having the same tax benefits of an LLC.

LLCs are often better for businesses with more than one member. Since you are the only member, S-Corps are probably a better bet. Additionally, it is a lot easier to sell shares of a corporation (non-voting shares) than to sell % ownership of an LLC when seeking funding.

By incorporating, you automatically get an EIN/Tax ID since a corporation is considered a separate entity.

In regards to building corporate credit, here is an extremely helpful link.

Bad advice. Disregard.

**fkj** · 02-27-2009 08:33 AM

Originally Posted by BusinessAdviser

Bad advice. Disregard.

Disregard which part? I'm confused again.

Are there any experienced members here who have structured a business in such a way that could help me out? S-Corp, or SMLLC? SSN or EIN for Business credit?

This company will be built and then sold eventually. Which entity would be best for this situation? I'm not just looking for the easy way, I'm looking for the best way. The most legal way. Thank you for any further advise.

**BusinessAdviser** · 02-27-2009 09:13 AM

Originally Posted by mthomas

I think filing for an S-Corp would be your best bet. You get to enjoy unlimited liability while also having the same tax benefits of an LLC.

Couldn't you just as fairly say, "I think filing for an LLC would be your best bet. You get to enjoy unlimited liability while also having the same tax benefits of an S-Corp?!"

Originally Posted by mthomas

LLCs are often better for businesses with more than one member. Since you are the only member, S-Corps are probably a better bet. Additionally, it is a lot easier to sell shares of a corporation (non-voting shares) than to sell % ownership of an LLC when seeking funding.

What is your basis for stating that "LLCs are often better for businesses with more than one member. Since you are the only member, S-Corps are probably a better bet?" You're simply making a conclusive statement without any reason behind it. Especially if you don't understand the differences between the two.

Originally Posted by mthomas

By incorporating, you automatically get an EIN/Tax ID since a corporation is considered a separate entity.

Is an LLC not a separate entity?!

I could write a short novel on the two. If you have specific questions, shoot away, but please don't take advice from people who provide either incorrect or no facts or arguments supporting a recommendation. Especially when they know nothing about your situation or goals.

**IowaGas** · 02-27-2009 09:20 AM

I am a sole owner of a LLC, I started with a partner and he sold his shares to me, and never switched. I would strongly recommend finding a local lawyer specialize in business. He/she will know the local, state and federal laws and will file the proper paper work with them. It is worth the cost, and maybe even ask a local bookkeeper/tax person. I will say one thing for sure get the EIN and keep business and personal separate and easier to sale

**fkj** · 02-27-2009 09:25 AM

Ok.

@BusinessAdviser
Which entity would be best for an online company with one owner and would provide the autonomy for later sale, and would allow for the building of business credit unattached to the owners SSN?

Thank you for your help.

**BusinessAdviser** · 02-27-2009 11:01 AM

Originally Posted by fkj

Ok.

@BusinessAdviser
Which entity would be best for an online company with one owner and would provide the autonomy for later sale, and would allow for the building of business credit unattached to the owners SSN?

Thank you for your help.

Depends when you plan to take income from it. That's one issue, based on tax implications. But really there are positives and negatives to each entity.

**fkj** · 02-27-2009 11:28 AM

The answers.. they do nothing...

I'm sorry BusinessAdvisor, but you asked me to ask specific questions. When I did, you gave me a vague answer. How is this helpful? Really?

I guess I should be as cautious about your advise as you wish other be about mthomas, no?

"please don't take advice from people who provide either incorrect or no facts or arguments supporting a recommendation."

I would just like a bit of clarification before I start the process. The internets are proving not to be the place for experienced advice anymore.

**BusinessAdviser** · 02-27-2009 12:42 PM

And I asked you a very specific question in response, since your "specific questions" were not sufficient to provide a helpful response: "Depends when you plan to take income from it." I won't waste my time anymore. Good luck.

**fkj** · 02-27-2009 01:00 PM

You didn't ask me a question. You made a statement, which i took as such. I'm not sure where the hostility and combativeness comes from, but as a "YE Expert" I would think you to be a bit more helpful. Have you gone through this scenerio, or are you just sharing hear say? Do you have an LLC, SMLLC, SCorp?

If someone else could help, I would appreciate it.

**BusinessAdviser** · 02-27-2009 01:17 PM

Originally Posted by fkj

You didn't ask me a question. You made a statement, which i took as such. I'm not sure where the hostility and combativeness comes from, but as a "YE Expert" I would think you to be a bit more helpful. Have you gone through this scenerio, or are you just sharing hear say? Do you have an LLC, SMLLC, SCorp?

If someone else could help, I would appreciate it.

I made a statement, "Depends when you plan to take income from it." I logically assumed you'd understand that my answer would...yep, DEPEND ON WHEN YOU PLANNED TO TAKE INCOME FROM IT. Since I don't know the answer to that, or have any way to find it out on my own, I assumed you'd provide it if you wanted my advice.

To you, sir, I ask, "Where does all the hostility and combativeness come from?!"

I HAVE been through the same situation. A number of times. I attended law school so as to understand some of the differences between different entities. I consult with a CPA for my businesses to make decisions based on the best tax implications, decisions which include the type of business entity to use, where to create it, and when to change the type of entity, if appropriate to do so.

I'm here to help, not fight with people, so I'll offer my thoughts to those who desire to consider them.

Good luck.