As a small business owner, you might have been approached by an independent contractor or freelancer who wants to work for your company
However, they ask you to fill out their Internal Revenue Service W-9 form for them to get paid.
With over a decade of practice as business consultant for limited liability companies, and a thorough research on the topic, I'll provide you with comprehensive steps on how you could fill out a W9 form for your LLC. The article is backed with personal experience and legal information from our team of attorneys.
Quick Summary:
- To fill out a W9 for an LLC, individuals are required to provide their personal information and determine their LLC's tax classification.
- Tax Identification Number (TIN), legal name, address, and business name should be included in the form.
- A W9 is a supplemental document attached to the 1099 form.
Filling Out a W-9 Form
Filling out a W-9 form will require individuals to provide their legal name, and official company name and determine which tax classification the entity falls into.
Line 1: Legal business name
When filling out the first sections of the W-9 Form, you must use your legal name as it appears in the IRS records and your papers.
Line 2: Name of your company or disregarded entity name
Enter the full record name as mentioned in the Internal Revenue Service records.
Line 3: LLC tax classifications
Let's go through each LLC federal tax classification and how to fill out Form W-9 for each one.
C-Corporation tax status (C)
A C-Corp is a limited liability company that elects to be taxed as a corporation by the IRS.
Steps to fill out a W9 as a C-Corporation:
- If your LLC is taxed as a C corporation, please check the box on line 3 of IRS form 8832.
- On the left side of the screen, click on “Completed Forms” and then “Form 941.” To the right of the LLC box, type “C.”
- On line 1 of the form, include the legal name of the LLC as it appears on IRS documentation.
- TIN- Enter the EIN, employer’s identification number
This is the option of being taxed as a C corporation. Whether there is only one member or many, this status can be assigned to the LLC.
S corporation tax status (S)
An LLC that wants to be classed as an S corporation by the IRS must fill out Form 2553.
Steps to fill out a W9 as an S-Corporation:
- If your LLC is taxed as a C company, check the box on line 3 of Form 941 and write "S" to the right of the LLC box.
- Name- Enter the legal name of the LLC, as it appears on IRS documentation on line 1 of the form.
- TIN- Enter the EIN, employer’s identification number
This is a paperwork choice to be taxed as an S corporation. Whether there's a single member or many, this status may be granted.
Partnership tax status (P)
All LLCs with more than one member that have not chosen to be treated as an S or C company for federal tax purposes will be treated as a partnership by default.
Steps to fill out a W9 as a Partnership:
- LLCs with two or more members should check the box on line 3 of the Form W-9 and enter "P" to the right of the box if they are operating as a pass-through entity.
- Name- Enter the legal name of the LLC, as it appears on IRS documentation on line 1 of the form.
- TIN- Enter the EIN, employer’s identification number
The partnership itself is not subjected to tax, only the members.
Single-member LLC (disregarded entity)
The IRS does not consider a single-member LLC to be a separate entity from its owner. In this situation, single members must fill out their Form W-9.
Steps to fill out a W9 as a Single-Member LLC:
- Unless the single-member LLC has chosen to be classified as a C or S corporation, it should enter its owner's tax classification on line 3.
- Name- Enter the legal name of the LLC’s owner, as it appears on official documentation on line 1 of the form.
- TIN- Enter the owner’s SSN, social security number
A disregarded entity is considered a Sole Proprietorship or single-member LLC by the IRS.
Other Things To Know About A Disregarded Entity
Any foreign business will be considered a disregarded entity and may have any of these LLC classifications:
- Foreign General Partnership (GP)
- Foreign Limited Liability Partnership (LLP)
- Foreign Limited Liability Company (LLC)
If you are a Foreign General Partnership (GP) or Foreign Limited Liability Partnership (LLP), check the fourth box on the W-9. Fill out lines A – D as instructed.
Finally, if you are a Foreign Limited Liability Company (LLC), check the fourth box on the W-9. Fill out lines A – D as instructed.
Line 4: Exemptions
Individuals or organizations that are not subject to backup withholding or FATCA reporting can indicate it on line 4. They may do so by entering any of the four correct codes on this line.
Line 5 & 6: Address
To register, you must first type in your complete address. Then, go through the three statements in Part 2 and sign them to verify that they are correct.
Part II: Certification
By electronically signing your Form W-9, you verify that the data is accurate.
What is Form W-9?
Form W-9, Request for Taxpayer Identification Number and Certification, is a form that must be completed by people and businesses who receive money from you.
It is used to:
- Determine if they're eligible to work in the US
- Determine them as a US person or Foreign National Identity and what type of taxpayer they are (business, individual, etc.)
Anyone who receives income from you must provide you with their taxpayer identification number (TIN) and certify that it is correct.
This includes:
- Sole proprietorship
- Corporation
- S corporations
- Partnership
- Limited Liability Company (LLC)
You need to understand that filling out a W9 form with the taxpayer identification number is required by the IRS for people who receive $600 or more in compensation from your company in a year and are not employees (note: an LLC member counts as an employee).
What is Form 1099?
IRS Form 1099 is a type of information return that reflects a contractor's yearly earnings as reported by the employing business [1]. The W9 form is furnished by contractors or freelancers to provide information to the entity they work for.
Essentially, the information provided by the W9 will be used for filing a 1099 tax form.
FAQs
What Is Backup Withholding?
Backup withholding is a type of withholding tax. The IRS requires it in specific situations, such as when you do not provide your correct name and taxpayer identification number to the payer (seller) or when the payer has no record of receiving your TIN and cannot reach you at your home or business address.
Is a W-9 Needed for an LLC?
W-9 is needed for an LLC as a way of streamlining the process for businesses, if you are an LLC with no employees and don't need to file a tax return, then check the box on line 3.
However, if you have employees or want to report taxes, check the LLC box on line 1 and fill out the W-9 Form as normal.
Who Fills Out a W9 Form?
Independent contractors, real estate businesses, and mortgage payors are required to fill out a W9 form.
What Percentage of Your Income is Taxed If You Fail to Fill a W9 Form?
If you fail to fill a W9 form, by law, your client must withhold taxes from your income at a rate of 24%. Whereas, if you furnish a W9 form, only 10% of your earnings is taxable.
Filling Out W9 for LLC
To recap, filling out Form W-9 as an LLC is not too complicated. As an LLC, you must submit a W-9 form if someone (a buyer) requests it, and there may be penalties for failing to do so.
Therefore, follow the steps and fill them in according to your business structure.
If you found the article helpful, you may want to read the best online legal services to provide you with long-term expert legal counsel. The article ranked the best companies that you could consult regarding all your business concerns.
References:
- https://www.irs.gov/forms-pubs/about-form-1099-misc
