Sale of SMLLC - new EIN?

[Gretel]

IRS has all kinds of scenarios when a new EIN is required but mine isn't covered either way. A SMLLC with employees needs to have an EIN separate from the owner. If this SMLLC is sold to another individual, can the EIN be kept? I know on the tax level is not really a sale of the LLC but of the assets of the LLC. But the EIN is for employee purposes only. What do you think?

[kathyc2]

New EIN. Different company=different EIN. First company issues W-2 for wages they paid under their EIN and second company issues W-2 for wages they paid under their EIN.

[kathyc2]

ICYMI- it sounds like new LLC qualifies as successor employer in which case they can use wages paid by first LLC in calculating the 7K for FUTA.

[Gretel]

New EIN. Different company=different EIN. First company issues W-2 for wages they paid under their EIN and second company issues W-2 for wages they paid under their EIN.

No, it's not a different company, at least not on the State level.

[kathyc2]

No, it's not a different company, at least not on the State level.

Then I'm confused. You had said they bought the assets of LLC rather than the LLC. Whether they bought the assets or the entire LLC along w/ current and future liabilities would make a difference.

[Gretel]

Then I'm confused. You had said they bought the assets of LLC rather than the LLC. Whether they bought the assets or the entire LLC along w/ current and future liabilities would make a difference.

Believe me, I am pretty confused myself since we are dealing with two different animals within the same LLC.

First, a SMLLC is disregarded for income tax purposes hence you can only sell the assets like you do with a Sole Proprietorship. Also, a SMLLC with no employees does not need to have an EIN for IRS purposes but f.e. for banking purposes it sure does.

Second, if a SMLLC has employees, then the IRS wants to have this LLC liable for all payroll issues and requires an EIN. This is the EIN I am referring to and I do not see any reason why this cannot be transferred if the new SMLLC member wants to assume all risks.

[kathyc2]

Believe me, I am pretty confused myself since we are dealing with two different animals within the same LLC.

First, a SMLLC is disregarded for income tax purposes hence you can only sell the assets like you do with a Sole Proprietorship. Also, a SMLLC with no employees does not need to have an EIN for IRS purposes but f.e. for banking purposes it sure does.

Second, if a SMLLC has employees, then the IRS wants to have this LLC liable for all payroll issues and requires an EIN. This is the EIN I am referring to and I do not see any reason why this cannot be transferred if the new SMLLC member wants to assume all risks.

Even though a SMLLC default tax treatment is the same as SP for tax purposes, for legal purposes it is a separate entity from the owner. If the LLC is sold (as opposed to assets) then there would not be a need for a new EIN. It would be the same as it the SMLLC elected to be treated as an S-corp, in that situation you probably wouldn't question whether a new EIN would be required.

While a LLC itself can be sold, that's an unusual way to do it. The LLC new member would be responsible for any liabilities incurred prior to when he owned it to the extent of LLC assets. If there are any warranty or potential lawsuits the new member would be responsible. Most lawyers and accountants recommend that instead of buying the LLC the new person forms their own LLC and then the second LLC buys the assets of the first LLC. This protects them from any unknown liabilities incurred from the first LLC.

But, if client actually bought the LLC, then no new EIN required as the EIN belongs to the LLC and not the former member.

[Gretel]

Even though a SMLLC default tax treatment is the same as SP for tax purposes, for legal purposes it is a separate entity from the owner. If the LLC is sold (as opposed to assets) then there would not be a need for a new EIN. It would be the same as it the SMLLC elected to be treated as an S-corp, in that situation you probably wouldn't question whether a new EIN would be required.

While a LLC itself can be sold, that's an unusual way to do it. The LLC new member would be responsible for any liabilities incurred prior to when he owned it to the extent of LLC assets. If there are any warranty or potential lawsuits the new member would be responsible. Most lawyers and accountants recommend that instead of buying the LLC the new person forms their own LLC and then the second LLC buys the assets of the first LLC. This protects them from any unknown liabilities incurred from the first LLC.

But, if client actually bought the LLC, then no new EIN required as the EIN belongs to the LLC and not the former member.

Thanks Kathy, for bearing with me. I came to the same conclusion without being able to put it into intelligible words. I totally agree with everything you say. However, this is a very unique situation were potential liabilities are not an issue.

[kathyc2]

Thanks Kathy, for bearing with me. I came to the same conclusion without being able to put it into intelligible words. I totally agree with everything you say. However, this is a very unique situation were potential liabilities are not an issue.

You're quite welcome.

[Gretel]

Follow up

for those who, just like me, was not sure that no new EIN was required: IRS accepted my change of the single member without changing the EIN.