Do I need a new EIN if I change from Sole Proprietor to LLC?

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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:

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.

Matt Horwitz
Founder & Educator, LLC University®
Forming an LLC shouldn't be so complicated. Our step-by-step guide will make the process a breeze – and no complex legal jargon! LLC University® teaches people how to form an LLC for free in all 50 states. We hope you find our free guides and resources helpful in your business journey.
Disclaimer: Nothing on this page shall be interpreted as legal or tax advice. Rules and regulations vary by location. They also change over time and are specific to your situation. Furthermore, this comment section is provided so people can share their thoughts and experience. Please consult a licensed professional if you have legal or tax questions.

12 Comments

  1. Julia Moreno January 5, 2019

    I want to use my DBA from my sole proprietorship as the name plus LLC on my new LLC. Do I have to cancel the DBA (how?) first so the name is available and then file my articles of Inc.? Or is there someway to transfer the name without waiting for the withdrawal to be effective?
    Thank you.

    reply
    • Matt Horwitz January 6, 2019

      Hi Julia, I don’t understand your question. Can you please rephrase it with more details. Thank you.

      reply
  2. peta January 20, 2019

    I just requested an EIN from the IRS as sole proprietor a week ago. However I changed my mind and want to make my business an LLC instead. Can I form and LLC and request a new EIN number without having to do anything else with the sole proprietor EIN or do I have to notify someone to cancel or convert it?

    reply
    • Matt Horwitz January 22, 2019

      Hi Peta, yes, you’re correct. You can just go ahead and form an LLC and get a new EIN. If you’d like, you can cancel the first EIN: cancel EIN with IRS. It’s optional though.

      reply
  3. Davis February 12, 2019

    Hello,

    Just so I’m clear on this…

    I acquired an EIN for my massage therapy practice a couple of years ago. I just got my LLC approval for the same business a couple of days ago. I have not changed anything. I am the sole member. I have no employees. I want to attach my existing EIN to my newly approved LLC.

    So, you’re saying it’s NOT possible to combine them and a new EIN is needed?

    reply
    • Matt Horwitz February 15, 2019

      Hi Davis, that is correct. The IRS wants you to get a new EIN for your newly-formed LLC.

      reply
  4. Miko January 10, 2020

    So I have a sole proprietorship that I have been paying taxes on using the EIN, I would like to now move that business under my LLC which has a different name & different EIN, can I do this?

    reply
  5. Minh February 5, 2020

    Hi Matt,
    I just formed an Sole Proprietorship with the IRS online and received my EIN to start my business. I am an insurance agent for a company which I have always been 1099 from the company (independent contractor) Should I form a LLC since it’s just me anyways? No employees. Am I better off in canceling my sole proprietorship EIN and start LLC. Want to start building business credit is my goal and start Amazon FBA or even E-Commerce business. Please help and advise thank you

    reply
    • Matt Horwitz February 6, 2020

      Hi Minh, if you want to build business credit and have the option to expand your business later (possibly hiring employees and/or changing the tax election of your LLC), you’ll want an LLC with its own EIN. So yes, you can cancel the first EIN if it’s no longer needed and you don’t want to operate as a Sole Proprietor. However, it sounds like there are two things going on here. It sounds like on one hand, you want to receive payments to an LLC for your insurance business… and you’re also considering another LLC at some point for an Amazon FBA and/or eCommerce business. While (typically) both business activities can be run under one LLC, it is not always advised as your “clumping” your liability all under one roof. It may be wise to consider two different LLCs. Furthermore, if you are a license insurance agent in California, you have another set of rules that govern your licensed activities. Those are administered by the California Department of Insurance. We don’t regularly deal with insurance agents carrying out activities with an LLC, so you’ll need to look into any special requirements with the DOI (we recommend giving them a call). Here is some overview information: California Department of Insurance: Business Entity Limited Liability Company Requirements. Hope that helps!

      reply
  6. James Cole February 15, 2020

    I have a client that has an existing EIN for his LLC. It has been filed as a partnership. His partner has since left the organization and wants nothing to do with it. If we want to change this from a 1065 filing to a 1040 filing, what steps should we take? Thank you in advance for any help.

    reply
    • Matt Horwitz February 23, 2020

      Hi James, in this situation they had a Multi-Member LLC (being taxed like a Partnership) and now there is a Single-Member LLC (being taxed like a Sole Proprietorship). Below are the things the LLC owner needs to do.

      If necessary, file Form 8822-B to change the LLC’s EIN Responsible Party. Wait for the IRS to return the correspondence on this before filing Form 8832.

      File Form 8832 to let the IRS know about the change in tax classification for the LLC. We don’t have an article on this yet, so the steps below should help. This is how you change an LLC’s tax classification from an LLC taxed as a Partnership to an LLC taxed as a Sole Proprietorship (at the time of this reply):

      • Enter the LLC name, its EIN, and the LLC’s address
      • 1: B
      • 2A: No
      • 2B: Skip/leave blank
      • 3: No
      • 4: Enter name and Social Security Number (or Individual Taxpayer Identification Number)
      • 5: Skip/leave blank
      • 6: C (A domestic eligible entity with a single owner electing to be disregarded as a separate entity)
      • 7: Skip/leave blank
      • 8: The date the Member left the LLC and transferred their ownership interest
      • 9: Enter the name and title (use “Owner”) of remaining owner
      • 10: Enter phone number
      • Part II (Late Election Relief): Skip/leave blank

      The following may also need to be completed:

      • Update LLC bank account
      • Update state Department of Revenue (or equivalent agency)
      • Draft a Sale of LLC Membership Interest
      • Adjust LLC basis/capital accounts
      • If necessary, file an Amendment with the Secretary of State’s office (or equivalent agency) if Members were listed on the Articles of Organization, Certificate of Organization, or Certificate of Formation
      • Amend the LLC’s Operating Agreement

      Hope that helps!

      reply

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