USA Single-member LLC headaches


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Hi, everyone.

I recently formed a single-member LLC, registered in the state of Georgia in the U.S. I did a ton of research, so I thought I had it all at least mostly figured out, but I've hit a bit of a snag, and I'm hoping maybe someone could help me out.

As far as I understand, since I have not elected for my LLC to be treated as a corporation for tax purposes, the IRS will consider my business to be a disregarded entity, and it will have pass-through taxation. I have no employees, nor do I meet any of the other criteria that would require me to get my company an EIN, but I did get one in order to get a business checking account. I indicated on the EIN application that I just needed it for banking purposes. When the IRS issued the EIN, they also gave me some information about how my LLC would be a disregarded entity. After getting the EIN, I set up my business checking account.

Everything was moving along smoothly so far. I applied to work as an independent contractor for a particular company and went through a rather grueling application and testing process. I passed, and they sent me my W-9 to fill out. I carefully read the IRS instructions. Specifically, I noticed these matters:

"If you are an LLC that is disregarded as an entity separate from its owner under Regulation section 301.7701-3 (except for employment and excise tax), do not check the LLC box unless the owner of the LLC (required to be identified on the “Name” line) is another LLC that is not disregarded for federal tax purposes. If the LLC is disregarded as an entity separate from its owner, enter the appropriate tax classification of the owner identified on the “Name” line."

"If you are a single-member LLC that is disregarded as an entity separate from its owner (see Limited Liability Company (LLC) on page 2), enter the owner’s SSN (or EIN, if the owner has one). Do not enter the disregarded entity’s EIN. If the LLC is classified as a corporation or partnership, enter the entity’s EIN."

So I put my name on "Name" and my LLC's name on "Business name/disregarded entity name," I checked "Individual/sole proprietor" for "federal tax classification" since the instructions said to NOT check the LLC box but instead check the box for the tax classification of the owner. I then put my SSN for the TIN since the instructions clearly stated that I should NOT put the EIN of the disregarded entity.

Now, the company I'm trying to work for is saying that, if I want them to write my checks payable to my LLC, I MUST put my LLC's EIN for TIN on the W-9. But the IRS clearly said not to do this. So I guess the only option is to just have them write the checks to my name? But then wouldn't I possibly lose the legal protection/limited-liability-ness of having a LLC if I'm just doing business as myself and my LLC means nothing? Does being a disregarded entity really mean I can't have checks written to my company? I know that a disregarded SMLLC is sort of an odd creature ... one that exists and doesn't exist all at once ... but this just doesn't make sense to me. Could anyone please help me understand this one?

Sorry this is so long, and thanks so much for the help!
Amy
 
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Mar 19, 2012
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There is no problem with what you did. If the company you are trying to work for refuses to issue a check in the business name even though it is clearly indicated on the W-9, then they are doing that their own reasons, not because of the law.

To explain it, forget, for a minute, that you even have an LLC. Say that you are a sole proprietor with a DBA of Bob's Painting. You give a general contractor a W-9 showing "Bob's Painting" as your business name, also giving your own name and SSN (just as you did with you LLC). The general contractor can write the check to Bob's Painting but must report the payments under your name and SSN. If the GC insists on writing the check out to you, that's on him. There is no requirement that he do so.

If you issue your invoices in the LLC name and you endorse the checks to the LLC and deposit them into the LLC bank account, I think that the fact that the company issued the check in your personal name would carry much weight in a an action to pierce through the LLC veil. You have done everything correctly and cannot control how another company makes the check payable.

Just keep doing everything the right way and if someone else doesn't cooperate, just make sure that you take appropriate action to get the funds into the right place.
 

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