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Do I need a new EIN if I change from Sole Proprietor to LLC?
Yes, if you have an existing Sole Proprietorship with an EIN (with or without a DBA) and you want to change your Sole Proprietorship to an LLC, you will need a new EIN from the IRS.
Even though a Single-Member LLC is, by default, taxed like a Sole Proprietorship, the IRS looks at the Sole Proprietorship and the new LLC as two different “entities”… therefore they require that you get a new EIN for your LLC.
(related article: how will my LLC be taxed?)
There is some confusion about “transferring” the EIN associated with your Sole Proprietorship to your LLC. You’ll often get mixed answers depending on who you speak to at the IRS or what you read online.
However, even if you mail a letter to the IRS requesting that the EIN be transferred from you as a Sole Proprietor to your LLC, the IRS will mail you back a rejection letter.
If you look at the “Do You Need a New EIN” page on the IRS’s website, it says the following for Sole Proprietors:
You will be required to obtain a new EIN if any of the following statements are true:
- You are subject to a bankruptcy proceeding.
- You incorporate.
- You take in partners and operate as a partnership.
- You purchase or inherit an existing business that you operate as a sole proprietorship.
You will not be required to obtain a new EIN if any of the following statements are true:
- You change the name of your business.
- You change your location and/or add other locations.
- You operate multiple businesses.
We highlighted “You incorporate” since this is what the IRS considers you to be doing.
Note: We know this is a bit confusing since the verb “incorporate” means to create a Corporation, not an LLC. An LLC is “formed”, not “incorporated”.
So what should you do?
If you decide to form an LLC, wait for your LLC to be approved, then apply for a new EIN for your LLC.
Note: In a few states, you actually need to get your EIN before your LLC is filed (ex: Louisiana), however, in most states, you want to wait for your LLC to be approved before applying for your EIN. Check out our how to form an LLC page for instructions on all 50 states.
You don’t have to write “final return” on your Sole Proprietor Schedule C. You’ll just file a new Schedule C to report the LLC’s income for next tax year. If your Sole Proprietorship has a DBA, you can cancel/withdraw it after your close your Sole Proprietorship.