If you’re the sole owner of your LLC, at some point, you’ll probably need to fill out a W-9 for your limited liability company (LLC) for tax purposes. Of course, you’d only need to do this if your LLC has no employees, which would make it a disregarded entity in the eyes of the IRS.
This guide outlines when you’ll need to file a W-9 and how to fill it out.
What Is a W-9?
A W-9 is an IRS form that verifies the name, address, and taxpayer ID number (TIN) of a person receiving income. The information is used to generate a form 1099, which is then used to report the income received.
If your LLC receives more than $600 in a year from another business, you must fill out a W-9 for that company, and they will issue you and your LLC 1099 at the end of the year.
How LLCs Are Taxed
LLCs are pass-through entities, which means income passes through to the member or members. If the LLC has only one member, it’s taxed as a sole proprietorship. If the LLC has more than one member, it’s taxed as a partnership.
However, LLCs are unique because they can elect to be taxed as a corporation if the members decide it makes financial sense. This is done by filing an election form with the IRS. In addition, you can choose to be taxed as a C-Corp or an S-Corp.
C-Corp status means income is taxed at the current rate for corporations (21% as of late 2022), which is lower than the usual individual taxpayer rate. But keep in mind that C-Corp shareholders – who are members in the case of an LLC – must also pay taxes on their distributions. This is called double taxation.
However, members are subject to self-employment tax in an LLC taxed by default as a sole proprietorship or partnership. Once such LLC switches to being taxed as a corporation, self-employment taxes no longer apply.
Similarly, self-employment taxes do not apply to members with S-Corp status, which is the main advantage of electing S-Corp status.
With S-Corp status, members are generally paid as company employees, which means more accounting and payroll expenses. Therefore, S-Corp status is only beneficial when the self-employment tax savings exceed those additional expenses.
If you choose to have your LLC taxed as a corporation, you will not need to fill out W-9s for the income your business receives.
How to Fill Out a W-9 for Your LLC
Go to this webpage and follow the below steps.
- Line 1: Fill in your full name.
- Line 2: Fill in your LLC name exactly as it appears on your LLC formation document, usually the articles of organization.
- Line 3: Check the box for single-member LLC, indicating that you are a sole proprietorship for tax purposes.
- Lines 5 and 6: Enter the full business address you used to register and create your LLC.
- Part I: Fill in your Social Security number or employer identification number (EIN). This is NOT the EIN of the LLC, which you are not required to have, but your own personal EIN, if you have one.
- Part II: Read, sign, and date the form to certify that all the information is correct.
Send the completed W-9 to the company from which you received income, not to the IRS.
LLCs offer many benefits, including tax flexibility. First, however, you should consider getting a tax advisor. They can advise you on W-9s and other key forms and help you decide which is best for your LLC.
This will help you avoid mistakes that could undermine your business’s success.