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How to Fill Out a W-9 for an LLC-Disregarded Company

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Published on January 10, 2022

Updated on January 10, 2022

How to Fill Out a W-9 for an LLC-Disregarded Company

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How to Fill Out a W-9 for an LLC-Disregarded Company

If you have a single-member LLC with no employees and have not elected to be taxed as a corporation, the IRS considers your LLC a disregarded company, or disregarded entity, for federal tax purposes. At tax time, there are a few things you need to know.

To learn more about LLCs, read this Step By Step article.

What is a W-9?

A W-9 is an IRS form that verifies the name, address, and taxpayer ID number (TIN) for 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 income from services of more than $600 in a year from another business, you must fill out a W-9 for that company, and they will issue you a 1099 at the end of the year.

How to Fill Out a W-9 for Your LLC

  1. Line 1: provide your full name. 
  2. Line 2: fill out your LLC name exactly as it appears on your original LLC formation documents.
  3. Line 3: check the box for single-member LLC, indicating that for tax purposes you are a sole proprietorship even though you have an LLC.
  4. Line 5 and 6: fill out the full business address you used to register your LLC.
  5. Part I: fill in your social security number or employer identification number (EIN) if you have one for your capacity as a business owner. This is NOT the EIN of the LLC. 
  6. Part II: read, sign, and date to certify that all the information provided is true.
  7. Submit the W-9 to the company that paid you, NOT the IRS.

How LLCs are Taxed

LLCs are unique in terms of taxation as their owners have a choice about how the company will be taxed. By default, an LLC is taxed like a sole proprietorship if it has one member and a partnership if it has more than one member. The single-member LLC is considered a disregarded entity by the IRS for federal tax purposes. There is no federal tax form to file for a disregarded entity.

In both cases, income “passes through” the business to the members, while profits and losses are reported on members’ individual tax returns. The LLC itself is not taxed, which simplifies the process for members. Also, losses and operating costs of the business can be deducted personally by the members. Taxes are paid at the personal tax rate of the members, although the owners may also have to pay self-employment taxes. 

Note that a multi-member LLC must also file form 1065 with the IRS, which is the U.S. Return of Partnership Income. Attached to this will be K-1 forms for each member showing their share of the business income. 

But LLCs owners can instead choose to be taxed as a corporation. To do so, the LLC must file a document, referred to as an election, with the Internal Revenue Service (IRS). The LLC must then decide if it wishes to be taxed as an S corporation or a C corporation.

C Corp status means profits are taxed at the current rate for corporations (21% as of early 2022), which is significantly lower than the typical individual taxpayer rate. But keep in mind, C Corp shareholders, which includes members, must also pay taxes on their distributions (but not self-employment taxes). Thus, the C Corp is subject to what is sometimes referred to as double taxation. 

As with sole proprietorship and partnership status, S Corp taxation considers the LLC a pass-through entity, which means income passes through the company and into the hands of the owners. At this point, taxes are applied at the same rate as those of individual taxpayers.

S Corps use Form 1120S to file their taxes, which is used to report the income, losses, and dividends of S corporation shareholders. S Corp shareholders do not pay self-employment taxes, which is the primary advantage of S Corp status compared to sole proprietorship or partnership. 

In Closing

As a single-member LLC, you are considered a disregarded entity by the IRS for tax purposes. When you receive income for services from another company, you will need to fill out a W-9 to verify your TIN. Be sure to do it correctly to avoid any issues when you file your tax returns. It’s always good to get the help of a tax advisor when handling any tax matters related to your business.

Learn more from this Step By Step article detailing how to pay yourself from your LLC