What is required when a business is purchased by a new owner concerning the Employer Identification Number (EIN)?

When a business is purchased by a new owner, a new Employer Identification Number (EIN) is necessary in most situations. The EIN is a unique identifier for a business entity that the IRS uses for tax purposes, and it is typically associated with the structure and ownership of the business.

When ownership of a business changes significantly, particularly if it is sold to a new entity or individual, the IRS requires the new owner to apply for a new EIN. This process ensures that tax records are accurate and that the new owner is held accountable for tax obligations under their ownership period.

For example, if a sole proprietorship is purchased by another individual, the new owner must obtain a new EIN to establish their separate tax identity. In contrasts, certain business changes, such as changes in the name of an existing corporation, do not necessitate a new EIN; the original can often continue to be used.

Thus, acquiring a new EIN reflects the change in ownership and ensures compliance with tax regulations as the new owner will be responsible for reporting income and expenses, as well as any payroll taxes associated with their employees under the new business structure.