Limited liability companies exist as a way to limit the liability of a business or individual for debts and obligations. The LLC is a type of legal business entity that is formed by filing Articles of Organization with the state where it conducts business.
LLCs can be used for many different types of businesses, but one major use is to help protect assets from creditors if you go bankrupt.
LLCs are popular because they often provide the same level of protection as an S Corporation or partnership but cost much less to form and maintain than a corporation. LLCs also offer "pass-through" taxation, meaning all income and expenses are reported on the individual members' tax returns.
LLCs can be formed without an SSN or EIN. However, business owners need to understand what they can and can not do without an SSN or EIN.
What is an SSN?
A Social Security Number (SSN) is a nine-digit number issued to US citizens and permanent residents by the Social Security Administration (SSA). The first three digits are known as area numbers, which correspond with geographic regions of issuance.
For example, 055 represents New York City, while 344 indicates St. Louis, Missouri. These codes have no meaning outside SSA. The remaining six digits are the serial number assigned to the cardholder, unique for each individual.
The SSN is used to identify individuals for tax and other government-related purposes. It also serves as a key identifier for Social Security benefits and programs. For these reasons, it's important to protect your SSN from unauthorized use.
The Internal Revenue Service allocates Social Security Number to every US citizen, which means that every business owner has to have one before starting a business.
SSN is vital for everything from opening a bank account to getting credit cards and mortgages, renting an apartment, or filing taxes. Without it, you won't be able to do anything on your own as a single US citizen/permanent resident.
In fact, many people who are new to the country think that they can't do anything without an SSN and give up trying to establish a business. However, there are ways to form an LLC without an SSN.
Does an LLC need an SSN?
An LLC is treated as a pass-through entity (disregarded entity) for tax purposes by the Internal Revenue Service.
An LLC needs to use an SSN or EIN to file a tax return. The SSN will be the number associated with you and used to report income tax on the LLC's behalf. If you don't have an SSN, the EIN can be used in its place.
There are some states that do not require an SSN or EIN to form a limited liability company, but most of them will still require you to list one on your formation documents.
In order to avoid any potential issues with the state, it is best to check citizenship or residency requirements with the agency before filling out any LLC filing forms.
If you are a foreign individual or business entity in the United States and do not have an SSN, you can apply for an Individual Taxpayer Identification Number (ITIN). This number will allow you to file taxes for your LLC.
Why is SSN Required?
Business entities or individuals in the United States need a Social Security Number (SSN) to become eligible for social security benefits, employment, and tax purposes.
If you are operating a sole proprietorship or a single-member LLC, no federal guidelines require the need for an SSN to operate in the United States legally.
However, it may be necessary for some entities to have an SSN if they wish to engage with other business owners outside their entity, hire employees, fulfill tax obligations, or open a business bank account.
If you do not have an SSN, it is still possible to form a business entity in the United States; however, there are other methods that must be used in order to identify and verify the individual or company.
How to Obtain an SSN?
Obtaining a Social Security Number (SSN) online is possible but not straightforward. You must take some additional steps to make sure that the online application process will be successful and get your SSN quickly.
The first step of the online application takes place at ssa-online.org, where you can create an account by providing information like name (including alternate names), date of birth, and your citizenship status.
You also need to provide at least two ID documents that can verify your identity. The documents can be a passport, driver's license, state-issued ID card, or military ID.
After you create your account and verify your identity, you will need to go through a second step in the application process: applying for a number.
The Social Security Administration (SSA) will ask you for identifying information like your name, date of birth, and citizenship status.
This is an important step because SSA cannot process your application if it does not have all the necessary information.
Employer Identification Number and SSN for LLCs
Federal employer identification number or Employer identification number (EIN) is a nine-digit number assigned by the IRS to businesses.
It is also used for tax reporting purposes. An EIN is not the same as a social security number (SSN) issued to individuals.
If you are forming an LLC, you may need to apply for an EIN even if you don't have staff or clients. You can apply for an EIN online at the IRS website, but you will need your LLC's Federal Tax ID Number to complete the process.
Since this is a unique number that identifies your company, make sure not to share it with anyone outside of your business group.
If you are starting an LLC with employees or want to open an LLC bank account, you will need to apply for an EIN and a social security number (SSN) in order to report wages and taxes.
Employers can request either an SSN or an EIN when they hire new staff members who are not US citizens; however, the IRS prefers that employers use their employees' SSNs.
Federal employer identification number (FEIN) is a nine-digit number that Federal agencies use to identify businesses.
If you are forming an LLC, you may need to apply for both EIN and SSN, even if there are no employees or clients. You will need LLC's EIN to file in tax documents.
No matter if you have a multi-member LLC, a single-member LLC, or a corporation (S or C corporation), your EIN is the same. It is used for tax filing purposes, reporting LLC income, and for any tax-related issues that may arise.
Online EIN application is available on the IRS website. By using IRS form SS-4, you can apply for an EIN number for your LLC.
You can apply either online or by mail, but you will need to provide basic information about the company and yourself. EIN Confirmation Letter will be sent to the mailing address you provide.
Make sure to keep your EIN confidential and do not share it with anyone outside of your business group. If you lose it, there is no way to get a new number assigned, so make sure to store it in a safe place.
The only exception is a third-party designee. An EIN and the applicant's contact information can be instantly provided to an eligible authorized third party designee in the United States.
The recipient can obtain an EIN and give it to the applicant, who may immediately start a business in the United States, open a business bank account, apply for licenses, and comply with rules provided by the Internal Revenue Service.
Can I Get an EIN Without an SSN?
Yes. Even if your LLC already exists, you can get an EIN without an SSN by filing IRS Form SS-4. When registering, make sure to provide your individual tax identification number (TIN) or your third-party designee's EIN.
You will also be asked your LLC name, registered agent address (if they're your designee), and other information.
Is the Federal Tax ID Number the Same as SSN?
No, they are not the same. The Social Security Number is a unique identifier assigned by the federal government to individuals for tax purposes (report LLC's income, pay the excise tax, etc.); however, it can also be used as an account number in various applications.
Also known as Taxpayer Identification Number or Federal Employer Identification Number (EIN), SSN identifies you and your income on tax returns.
If you are forming an LLC without providing your SSN, you will need to apply for a federal tax ID number.
Is EIN Free for a Limited Liability Company?
Yes. It's a myth that EIN costs money. The IRS offers free EINs for businesses. You can apply online or by mail.
Even if you are a non-US citizen, you can still apply for an EIN with the international EIN department. If your foreign LLC exists, you will need to apply by phone with the IRS.
Can I Open an LLC With an ITIN Number?
ITINs are for people who don't qualify to get SSNs. You don't need an ITN for LLC approval in the United States, and it may be enough to run a sole proprietorship or single-member LLC.
Multi-member LLCs (two or more owners) are more complicated and require filing additional paperwork, even if you don't need an SSN.
Can I Enter EIN Instead of SSN?
Yes, you can enter your EIN in the applicable field on the online form. If you don't have an SSN, you can still form an LLC by entering your EIN in the appropriate field on the online form.
Your EIN is essentially your business's ID number and will be used for tax purposes.
Note that you may need to provide your SSN later on during the LLC formation process, such as hiring employees or applying for loans from banks or lenders.
Is ITIN the Same as the Social Security number?
No, it is not. ITIN stands for Individual Taxpayer Identification Number, issued by the IRS to foreign nationals or individuals without SSN who are required to file a tax return in the US.
An individual needs an SSN only if they work in the United States and wants to get paid legally.
Does a Single-member LLC Need an EIN?
An EIN is not required for single-member LLCs that are a disregarded entity and have no employees or excise tax liability.
For federal tax purposes, the name and TIN of the single-member owner should be used.
Can I use EIN Instead of SSN on w2?
Yes, you can. Employers are required to include EIN instead of SSN on W-two forms for sole proprietors or small businesses that have not yet applied for an NI number.
Who is Eligible for SSN?
Only US citizens and permanent residents have the eligibility to apply for SSN. Foreign nationals who have permission to work in the US also qualify, with some rare exceptions like students on an F-visa or dependents of someone who does not qualify.
Should I use EIN or SSN on w9?
You can use both, although you will only need to use one or the other on your w9. The IRS isn't specific about which one to use as long as you don't have the wrong LLC name or LLC's office address on it.
If you are unsure which one to use, go with the SSN because most other businesses have on their w-forms.
It will save time later when trying to file your taxes online or through the mail if all of the information matches up.
Even though EIN is for Internal Revenue Service while SSN stands for Social Security Number, they both essentially do the same thing--identify your business.
Can I use my SSN for an S Corp?
Yes, an S corporation can use an SSN and a C corporation. For federal tax reasons (you won't have to use your Social Security number on any public documents), you can use your own Social Security number.
However, keep in mind that this is applicable if you are a sole proprietorship taxed as an S or C corporation. If not, then your SSN might not be enough for banks or lenders.
Forming an LLC without SSN is possible but may result in legal or tax consequences. Suppose you are considering forming your own company and don't have a Social Security Number yet.
In that case, it's best to consult with an attorney or law firm that offers this type of legal or tax advice so you can figure out if there will be any negative consequences for not having one when creating your business structure.
A tax professional or a business lawyer will know all the nooks and crevices of founding a small business as an LLC, so make sure you get their advice first.