This post is the result of an email exchange that I had with a foreign entrepreneur. He raised a question that I had not previously considered: When should a business have one EIN (Employer Identification Number), and when should it have two?
One EIN vs. Two – Assumptions and Principles
The following are the assumptions:
- The foreign entrepreneur own a non-U.S. business entity.
- That entity will start doing business in the U.S.
The following are the principles that govern this analysis:
- Each legal entity that is doing business in the U.S. requires its own EIN.
- A U.S. corporation or limited liability company (LLC) is a legal entity separate from any foreign business entity.
- A U.S. branch office of a foreign entity is not a separate legal entity. (The term “branch office” does not have a precise legal meaning. Please see What Is a Branch Office?)
- Each entity should have only one EIN.
One EIN vs. Two – Fact Situations
Here are various fact situations and, for each, a discussion of how many EINs are appropriate.
#1 – A foreign entity does business remotely with U.S. customers but does not have any presence here.
The foreign entity may obtain an EIN. Please see Foreign Company Alert: Obtaining an EIN may be your Biggest Challenge in the U.S.
#2 – A foreign entity does business remotely with U.S. customers and obtains an EIN. That entity forms a new U.S. entity (a subsidiary) through which it then does business with U.S. customers.
The new U.S. entity should obtain its own EIN. The overall business organization then will have two EINs, one for the foreign entity and one for the U.S. entity.
#3 – A foreign entity does business remotely with U.S. customers and obtains an EIN. That entity opens a U.S. branch office through which it then does business with U.S. customers.
The overall business organization needs only one EIN, because there is only one legal entity. It should not obtain a separate EIN for the U.S. branch office.
If You Make a Mistake
The foreign entrepreneur eventually disclosed that his situation was like #3 above. But he had made a mistake in that he had obtained a separate EIN for the U.S. branch office.
The Internal Revenue Service discusses this situation at page 2 of Publication 1635, Understanding Your EIN:
You should have only one EIN for the same business entity.
The IRS then explains what to do if your entity has more than one EIN:
If you have more than one EIN and are not sure which one to use, call the Business and Specialty Tax Line at 1-800-829-4933 (TTY/TDD users can call 1-800-829-4059). Provide the numbers that you have, the name and address to which each was assigned, and the address of your main place of business. The IRS will tell you which number to use.
Dana H. Shultz, Attorney at Law +1 510-547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.