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What to do if your company changes form

October 27, 2010

It’s not unusual for a business to switch form from a corporation to an LLC, a sole proprietorship to some kind of corporation, or an S corp to a C corp or vice versa.
 
Among these changes, when does the entity keep its EIN and when does it need a new one?
 
Changing from a corporation to an LLC. Because the normal conduct of business does not change, owners often assume that the new entity will retain the former entity’s EIN, which is already on prior tax returns and probably on registrations, financial accounts and licenses. Some firms may be receiving government payments or reimbursements, such as from Medicare and Medicaid, under the former EIN. If a business uses an outside payroll service, the service already has its EIN. 
 
What to do. The IRS does not transfer an EIN from an entity to its successor automatically. It looks at what happened under state law. When a corporation converts to an LLC under state law, the EIN will be reassigned from the corporation to the LLC. This is viewed as a mere change in legal status.
 
But when a corporation and an LLC merge, with the LLC surviving, the old EIN is not reassigned to the LLC.
 
The nuances of state law determine whether there was a conversion or a merger, and some states do not provide for a conversion. 
 
Changing from an S corp to a C corp. This is considered a mere change in tax status, so no new EIN is required. 
 
Changing from a sole proprietorship to an S corp or C corp. This is considered only a change in tax status, which does not require a new EIN.

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