To me, that says you can enter the social or the EIN.
To me, and I’m right, you’re completely reading it wrong. I said an individual is the owner. If you have a single-member LLC wholly-owned by an entity, say a corporation or a partnership, then you put the EIN of the “owner,” which would be the corporation or partnership. That is the situation the instruction is referring to when it talks about use of an EIN. If you have a single-member LLC owned by an individual, you use the individual’s SSN.
The only person, aside from myself, that understands you use the owner’s SSN (or EIN, in the case of a regarded entity as the owner), is ManVsTax.
An individual can get an EIN. I had a child care provider who sent out yearend statements to the parents using that EIN so that she would not disclose her SSN.
We all agree that a sole-proprietor can get an EIN. The plain old individual cannot…and that’s what we’re talking about here: The guy that forms a 1-member LLC. His SSN, as owner of the 1-member LLC, goes on the W9, not the EIN for the LLC. All the guidance as to the reporting is consistent with that idea.
With that said, I would give some pushback to this comment:
For 1099s, the instructions seem pretty clear to me. If they want to provide an EIN for the SMLLC, they should obtain a sole proprietor EIN.
And here’s why. The instructions say this:
For the TIN, enter the owner's SSN (or EIN, if applicable).
Well, if you have a single-member LLC that is owned by an individual, and that individual so happens to have an EIN for his sole-proprietorship, that EIN is for the sole-proprietorship business. It is not for the individual as sole-proprietor. Page 13 of the instructions says as much in the sole-proprietorship section.
Where does that leave us? Let’s say a guy has a sole-proprietorship, MVT Tax Services. That guy obtains an EIN for this sole-proprietorship. Then, that same guy creates MVT Tax Services, LLC, which is a 1-member LLC. An EIN is obtained for said LLC. So, the guy now has 2 EIN’s.
One question is whether or not the sole-proprietorship gets booted out of existence once the LLC is formed. I suspect the answer to that is yes, for the most part. That’s the whole point of having liability protection. Assuming the LLC was around for the whole year, or is at least who we contracted with, then the W9 should arrive for the LLC, with the individual owner’s SSN on it. If that W9 is for a 1-member LLC, but has a sole-proprietorship EIN on it, my take is that it’s an invalid W9. That is, we have to consistently follow the reporting rules (W9 and 1099) for 1-member LLC’s.
Now, if the guy hands us a W9 with no mention of the LLC, but it is prepared for a sole-proprietorship, with an EIN for that sole-proprietorship…then we can probably accept it and issue the 1099 in the EIN of the sole proprietorship. One possible issue, though, is who we wrote the checks to.
Yes, some individuals do have an EIN. I have a client that has one. She owns commercial real estate and did not want to issue 1099's in her social security number, so she applied for, and received, and EIN.
Individuals that are not making payments in the course of a trade or business do not get EIN’s (other than household employers). It’s that simple. We all know that a sole-proprietorship can get an EIN – so you guys should stop harping on that point. If she got an EIN for her Schedule E rental real estate trade or business and she’s actually using that on W9’s she sents to tenants, so that said tenants can 1099 her, the IRS will likely have an issue with that. The reporting obligation there is on the part of commercial tenants and they are required to 1099 rents paid to the individual property owner that collects the rents. I would seriously doubt her real estate is held in a DBA name. And that’s because it’s illegal.