Does he need a new EIN?

[Anonymous]

Started a multi-member LLC two years ago with 80/20 ownership. EIN has company name on line 1 but is addressed to me as member.

I (the 20% owner) am now resigning. The other owner (currently 80%) is going to take over 100% of the business. 

My gut is that he needs a new EIN as it’ll be a LLC taxed as a partnership (we get K1s) switching to an LLC taxed as a sole proprietor. 

I had hoped there might be a workaround as opening new bank accounts, credit cards, etc. will be annoying for him. So figured I’d ask!

Only thing I can think of is doing 2553 to elect SCORP tax status but maybe that wouldn’t work. 

[jobu1669]

See answer below.....multi to single member = no

Do I need a new EIN 

[AmeliesUncle · Accepted solution]

No.   The LLC still exists, and it already has an EIN.

Limited Liability Companies

You will be required to obtain a new EIN if the following statement is true:

• A corporation files papers with the state to convert to an LLC and will use the default classification of partnership. (The corporation is treated as if it has liquidated in this case.)

You will not be required to obtain a new EIN if the following statements are true:

• A corporation files papers with the state to convert to an LLC and will elect via Form 8832 to be taxed as a corporation.
• The number of members in the LLC changes from more than one member to a single member.
• The number of members in the LLC changes from a single member to more than one member.
• A sole proprietor files papers to become a state recognized entity, organizes as an LLC, and will file Form 8832 or Form 2553 to elect to be treated as a disregarded entity or taxed as a corporation or small business corporation.

https://sa.www4.irs.gov/modiein/individual/help/help-toc.jsp#16

[Anonymous]

But aren't multi-member LLCs taxed as partnerships?

[AmeliesUncle]

That is the default classification for how it is taxed.

But when you get an EIN for a multi-member LLC, it belongs to the LLC, not the Partnership.  So if the LLC still exists, the EIN is still valid, regardless if it is still taxed as a Partnership or not.

[Anonymous]

I called the IRS twice just now.

The first representative told me that he DOES need a new EIN, and references the "Do I need a new EIN?" page on their website which states that a partnership going to a sole proprietor does need a new EIN, even if entity is LLC.

I called right back a second time. This time, the rep told me he DOES NOT need a new EIN, but needs to write a letter explaining the change to:

Internal Revenue Service

333 W. Pershing Road

Mail Stop 6055S-2

Kansas City, MO 64108

So confusing.

[AmeliesUncle]

The second one is correct.

It is NOT a Partnership.  It is a LLC that is taxed as a Partnership.

As was noted, writing to the IRS about the change should hopefully reduce the IRS's confusion for when a "final" 1065 is filed for the LLC.

[Anonymous]

OK, thank you. So does he still need to write a letter to the IRS explaining the new structure? Because my accountant will file a 1065 with "final return" checked ... 

[AmeliesUncle]

I would recommend it.  Or there may be a telephone number to the EIN department that could be used.

On the other hand, does it even need an EIN?  Are there employees or does the business pay excise taxes?  If not, in most cases it does not need an EIN at all.  The owner would get an EIN in his/her name (not the LLC's name) to use for filling out a W-9.

[Carl]

Two things to clarify here. (One of them I think you arleady know)

 - If there are only two members of the partnership or multi-member LLC and one is resigning, then the partnership no longer exist and must be dissolved. A partnership or multi-member LLC can not continue to exist with only one owner/member. Period.

 - If the EIN was registered under your SSN and you are the one leaving the business, then that EIN has to be retired forever. Otherwise, if the EIN was registred under the other person's SSN and they will retain ownership of what will now be a single member LLC, they can continue to use the same EIN but will need to notify the IRS of a business structure change from multi-member LLC reported on 1065, to a single member LLC reported on SCH C as a part of the remaining owner's personal 1040 tax return. Hopefully they know how to correctly transfer inventory and assets so that there share of asset depreciation from the now-defunct partnership is properly accounted for.

[Anonymous]

The IRS mentioned that there is a form that can be sent in to change responsible party:

https://www.irs.gov/pub/irs-pdf/f8822b.pdf

[polyayancheva]

Help - EIN Assistant (irs.gov)

You will not be required to obtain a new EIN if the following statements are true:

• The number of members in the LLC changes from more than one member to a single member.

You may want to send the Amended Articles of Organization (do that at the state website) to the IRS to tell them that the LLC changed from multi member to one member. You need to include a letter that lists the LLC EIN, LLC name, address and the one owner name and SSN. Send the letter to:

IRS 333 West Pershing Rd
mail stop 6055 S-2
Kansas city MO 64108

Hope that helps!