No EIN for multi member LLC (holding stocks to give to EE)

[JJK]

Hello:

    My client just brought this to my attention.  In 2019, he created a multi-member LLC to simply hold the stocks that will be giving out to employees (EE).  Mainly, this LLC was treated as a holding trust mechanism and will be giving out stocks to EE when they are entitled to.  No other activity.  My client believed he did not need to file any EIN with IRS and did not need to select any tax entity to file any tax return.   I don't think he is right and this is not ok with law.   Thoughts?

[sjrcpa]

"he created" So how are there multi members?

What sort of income or expenses might this LLC (single or multi member) have?

Where did the stock it is holding come from?

[qbteachmt]

"and will be giving out stocks to EE when they are entitled to."

I wonder if this person really meant to have an ESOP. Because that is just weird, otherwise.

[JJK]

Thank you for your quick response.   At this point, I only knew that this LLC has at least 2-3 members and no income/expense except for holding stocks.   I believe these stocks are transferred out from a current C Corp (has normal operating trade/income/expense) out to this LLC.   However, these stocks are not granted so they are not reported in C Corp financial statements at all.  

[JJK]

I believe these stocks are held for ESOP.  I think the way of creating this "holding LLC" is wired and this LLC was created for no activity, EIN and no tax return filing.....so wired.

Not sure if IRS will allow a LLC (except Single Member LLC) being created without any EIN and tax return filing???

[sjrcpa]

Creation of an LLC is a state law matter. IRS has nothing to do with it.

[qbteachmt]

I don't see where which "stock" is being held, was ever addressed.

An ESOP is like a charitable trust. The ESOP would "own" some or all of that Corporation. The ESOP trust would not have partners; it has beneficiaries.

"Not sure if IRS will allow a LLC (except Single Member LLC) being created without any EIN and tax return filing???"

There should be annual 5500 filings.

It's time to seek professional guidance on this.

[JJK]

Understood - it's a state matter.   Is it ok to create a LLC without obtaining a EIN and do any tax return filing?  This is my concern. 

[JJK · Accepted solution]

Thank you.   

[sjrcpa]

If it is not required to file a tax return or needed for opening a bank account - yes.

[JJK]

got it.  thank you.

[qbteachmt]

"or needed for opening a bank account"

We are told it is holding some sort of stocks, which needed to be registered or "owned" to that entity somehow and could not be traded without some ID of some sort.

An ESOP doesn't give stock to the employees; it's holding them on behalf of each employee.

Nothing here makes sense so far.

[sjrcpa]

"Nothing here makes sense so far."

I agree.