Hello, EMSO!
You will not be required to obtain a new EIN. The IRS has stated that one does not need to apply for a new EIN in any of the following scenarios:
- If you report income tax as a branch or division of a corporation or other entity, and the LLC has no employees or excise tax liability.
- If an existing partnership converts to an LLC classified as a partnership.
- If the LLC name or location changes.
- If an LLC that already has an EIN chooses to be taxed as a corporation or as an S corporation.
- If a new LLC with one owner SMLLC, is formed under state law,and does not choose to be taxed as a corporation or S corporation, and has no employees or excise tax liability.
As far as the statement "You may draw additional amount as a distribution, and not have to pay self-employment tax on that distribution." this means that If you organize your business as an S-corporation, you can classify some of your income as salary, and some as a distribution. The distribution portion will only be subject to ordinary income tax, while your salary portion, will be subject to self employment tax in addition to ordinary income tax. You see when you are both an owner and an employee of an S corporation, you can receive compensation in two ways: salary and distributions. Your salary is paid for the services you provide to the company, and employment taxes are withheld from this compensation. However, as an owner, you may also receive a share of the company's profits through distributions. These distribution payments are not considered salary, so no employment taxes are deducted from them. This dual compensation structure allows an S-corp. owner/employee to receive regular income through salary while also benefiting from the company's success through profit distributions.
For more information see:
Please feel free to reach back out with any additional questions or concerns you might have!
Have an amazing rest of your day!
*Please say "Thanks," by clicking the thumbs up icon at the bottom of the post.
**Select the post that answers your question by clicking on "Mark as Best Answer
Terri Lynn
