How should an LLC fill out a W-9 form correctly? SSN vs EIN

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Limited Liability Companies

The W-9 form seems like a simple form with only a few fields to be completed. However, the requirements for limited liability companies (LLC) are really complex and confusing.  From our experience the largest number of incorrect W-9s come from LLCs.  The best way to understand how LLCs should fill out W-9s forms is to first understand the four types of LLCs tax classifications and then look at the requirements for each.  This will then help us determine what tax classification is required to be selected on Line 3 of the W-9 form as well as the name and TIN to be used.

LLC W-9 Tax Classifications

Let’s look at each of these LLC tax classifications in depth and determine how the W-9 form should be completed for each.

W-9 LLC Tax Classification

C=C corporation tax status

An LLC that has filed form 8832 with the IRS has elected to be treated by the IRS for tax purposes as a C corporation.  This C corporation tax status applies to the LLC regardless of whether they are owned by one member or multiple members.  A member is an individual or company that owns the LLC.

Tax classification – An LLC that has made a C corporation election will check the limited liability company box on Line 3 of the W-9 and then write in “C” as the tax classification to the right of the LLC box.

Name – The name used on Line 1 of the W-9 form should be the legal name of the LLC as shown on its tax return.

TIN – The TIN provided should be the LLC’s Employer Identification Number.

S=S corporation tax status

An LLC that has filed Form 2553 with the IRS has elected to be treated by the IRS for tax purposes as an S corporation.  The S corporation tax status applies to the LLC regardless of whether they are owned by one member or multiply members.

Tax classification – An LLC that has made an S corporation election will check the limited liability company box on Line 3 of the W-9 and then write in “S” as the tax classification to the right of the LLC box.

Name – The name used on Line 1 of the W-9 form should be the legal name of the LLC as shown on its tax return.

TIN – The TIN provided should be the LLC’s Employer Identification Number.

P=Partnership tax status

An LLC that has not elected to be treated as either a C or S corporation by the IRS and is owned by more than one member is automatically treated by the IRS as a partnership for tax purposes.

Tax classification – A “multi-member” LLC will check the limited liability company box on Line 3 of the W-9 and then write in “P” as the tax classification to the right of the LLC box.

Name – The name used on Line 1 of the W-9 form should be the legal name of the LLC as shown on its tax return.

TIN – The TIN provided should be the LLC’s Employer Identification Number.

Single-member LLC (disregarded entity)

An single-member LLC that is owned by one member and has not elected C or S corporation tax status is “disregarded” by the IRS.  That means that the IRS does not see the LLC as separate from the owner.  Therefore, the IRS requires that the single-member LLC provide the owner’s information on the W-9 form and not the LLC’s information.

Tax classification – A single-member LLC (that has not elected C or S corporation tax status) will select the tax classification of the LLC’s owner on Line 3 of the W-9.

Name – The name used on Line 1 of the W-9 form should be the legal name of the owner of the LLC as shown on its tax return.

TIN – The TIN provided should be LLC owner’s TIN.

Typically a single-member LLC is owned by an individual.  When this is the case, the W-9 form should be completed with the individual’s name on Line 1, “Individual/sole proprietor or single-member LLC” checked as the tax classification on Line 3, and the individual’s Social Security Number provided as the TIN.

Disregarded entity

The name, tax classification and TIN entered on the W-9 should never be for a disregarded entity.  In the W-9 context, this means that you should never use the name of a single-member LLC (that has not elected S or C corporation tax status) on Line 1 or the LLC’s TIN.  You should always use the owner’s tax information.  If the direct owner of the LLC is also a disregarded entity, use the first owner of the LLC that is not a disregarded entity.

If the owner of the disregarded entity is a foreign person or entity, the owner must complete an appropriate Form W-8 instead of a Form W-9.  This is the case even if the foreign person has a U.S. TIN.

If a foreign LLC that is treated as a disregarded entity for U.S. federal tax purposes has a single owner that is a U.S. person, the U.S. owner’s name is required to be provided on line 1.

Line 2 – Business name/disregarded entity name/DBA

Line 2 is a completely optional field and is not reported to the IRS.  It is just provided to help identify the entity completing the W-9 when the payer won’t be familiar with the “legal” name used on Line 1.

Disclaimer – Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties.

 

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