Has your business undergone a change in ownership or structure? If so, it might be time to change your EIN. While not all changes require an organization to change their EIN, there are certain events that trigger requirements to apply for a new EIN. The IRS provides a helpful list of circumstances that require a change in EIN.
For sole proprietors, the requirement to obtain a new EIN will be triggered if they have had any of the following occur:
Subject to a bankruptcy proceeding
Take partners and operate as a partnership
Purchase or inherit an existing business that you operate as a sole proprietorship
Corporations are required to obtain new EIN’s in the following circumstances:
Receive a new charter from the secretary of state
Subsidiary of a corporation using the parent’s EIN or a corporation that becomes a subsidiary of a corporation
Change from a corporation to a partnership or a sole proprietorship
New corporation is created after a statutory merger
Partnerships are required to obtain a new EIN if one of the following occur:
Incorporation of the partnership
Partnership taken over by one of the partners and operated as a sole proprietorship
End an old partnership and begin a new one
Limited Liability Companies
Since LLC’s do not have their own classification, the “IRS uses the tax entity classifications it has always had for business taxpayers: corporation, partnership, or disregarded as an entity separate from its owner.” If it is treated as a “disregarded entity” and is owned by an individual, then it is treated as a sole proprietor. If the “disregarded entity” is owned by any other entity, it is treated as a branch or division of its owner. When a single-member LLC forms a new LLC with more than one owner under state law, or if it chooses to be taxed as a corporation or an S corporation, then a new EIN will need to be obtained. New single member LLCs formed under state law with excise tax filing requirements for tax periods beginning on or after January 1, 2008 or with an employment tax filing requirement for wages paid on or after January 1, 2009, will also be required to obtain a new EIN.
If a trust is created with funds from the estate or if an estate operates as a business after the owner’s death, then a new EIN will need to be obtained.
There are four events that may trigger a require a trust to obtain a new EIN:
One person is the grantor/maker of many trusts
A trust changes to an estate
A living or intervivos trust changes to a testamentary trust
A living trust terminates by distributing its property to a residual trust
Experienced tax counsel can assist with identifying if your organization has experienced any of the triggering events. If so, counsel can prepare the proper filings to obtain a new EIN for your organization
For almost 20 years Kim Lowe has lawyered from the trenches. Kim lawyers from experience, using her knowledge of the law and understanding of how both for-profit and nonprofit business enterprises operate.
Rachell Henning is a third-year student at Mitchell-Hamline School of Law's innovative Hybrid program. Rachell is an Avisen Fellow alum who enjoys spending time with her husband and two young daughters when she is not working or studying.