If you started your company, a crucial thing you did was to establish the Tax ID Number (EIN). If you’re planning on selling or selling your company, you might think you could transfer the EIN to the buyer. The answer is simple; usually, it is necessary to assign a new EIN that must be issued when there is an ownership change.
Transferring an EIN to a new owner isn’t feasible. EINs, also known as Employer Identification Numbers, aren’t transferable from one business owner to another. However, there are instances when the business owner might require an additional EIN.
Can I Transfer My EIN To A New Owner?
One of the most crucial things a new business owner must do is obtain an EIN or tax identification number. If you plan to sell your business, you may wonder whether you could transfer the business’s EIN to a new owner. The short answer is not.
In the event of a change in ownership, it’s usually necessary for the owner to get a new EIN.
A New EIN Is Required.
Most companies have identical EIN for the duration they’re operating. There are certain situations where this isn’t the scenario.
The IRS has a few conditions for existing companies to apply for an EIN, including the following:
- Changes to the structure
- Change in Ownership
- Corporations with an updated charter
- Sole proprietors who are going through bankruptcy
- An affiliate of a company
- The merger is a statutory one that results in the creation of a new company
If you are thinking about ways to transfer ownership of a business, be aware of whether the owner who takes over will require the new EIN.
If You Do Not Require A New EIN
Certain business transactions don’t require an entirely new EIN, like the following:
- Change of the location
- Add locations
- Change of business name
- Corporate merger with the surviving company using the current EIN
Additionally, if a company opts for an S corp designation, the company won’t require an EIN change. Furthermore, partnerships and companies going through bankruptcy do not require new EINs. Many other scenarios do not require a need to obtain an entirely new EIN.
What Happens If An Owner Dies?
In most cases, when a company is sold, the new owner must apply for a new EIN. The death of an owner of the business could be more complicated, based on the type of entity. Various variables are at play when a business owner dies while a brand-new owner is brought into.
For corporations, ownership changes don’t always require a new EIN. Companies can remain in existence even after an owner passes away, so long there is a succession plan. In this situation, there is no need for a new EIN is needed.
If you inherit a business as a sole individual owner, you’ll require a new EIN. If the owner in a partnership or LLC dies, typically dissolves the company. Restructuring the business will require an entirely new EIN.
In the end, the type of business and the structure decide if an owner who is new to the business must apply for the tax ID number for a new one.
The Process Of Applying For A New EIN
If you need to obtain a new EIN because of an ownership change, you’ll need to get the number as soon as possible. If not, you can typically apply online and get your EIN within a couple of hours. If you have more difficult circumstances, it is possible to submit a mail-in application. It can take days or even weeks to allow the IRS to consider the application.
You can continue building your business under the new control when you’ve got your identification number. As you wait for the IRS to issue you a number, you can handle certain business documents.
You’ll have to inform banks, financial institutions and lenders you conduct business with about the change. It is possible to go through your current contracts to determine the need to alter the EIN. You might need to update your permits and licenses under the new EIN.
Changes To Business Names
If you’ve changed the business name, you’ll need to inform the IRS to ensure that your EIN will be transferred in the name of the change. In the event of a significant modification to your company -for example, the addition of a partner or selling your company or your EIN isn’t able to change hands.
The following individuals are allowed to transfer the EIN to a new company name, even if they’ve just modified their names:
- Corporate entities
- Sole proprietorships
EINs are akin to Social Security Numbers for businesses. Therefore, it’s not possible to transfer them to anyone else. The situation you’re in will determine whether you need to apply for an additional EIN or whether you can keep the same number.