If you're a non-U.S. citizen looking to establish a business presence in the United States, you've probably encountered the term "EIN" in your research. An Employer Identification Number (EIN) is an identifier issued by the Internal Revenue Service (IRS) for businesses operating in the U.S., such as a Limited Liability Company (LLC). Let us help demystify the EIN, guide you through the application process, and discuss the unique challenges faced by non-U.S. citizens.
What is an EIN?
An EIN is a nine-digit number used to identify a business entity for tax purposes. It's equivalent to a Social Security Number (SSN) for individuals. Whether you're opening a U.S. branch of your international company or starting a new venture on American soil, obtaining an EIN is a necessary step.
Americans often use their Social Security Number (SSN) as their identifier when opening a US bank account, obtaining a loan, or filing taxes. However, for non-US investors, the Employer Identification Number (EIN) serves as a valuable alternative, enabling them to engage in similar financial activities but specifically as a business entity. This distinction becomes particularly crucial for non-US investors seeking to purchase property in the US. In such cases, obtaining an EIN is essential if you intend to establish a legal business entity like a Limited Liability Company (LLC) to facilitate the purchase of a property in the US.
1. Determine Eligibility: Before applying, ensure that you meet the IRS criteria for obtaining an EIN. Generally, this includes having a legal U.S. address and a responsible party with a valid SSN or Individual Taxpayer Identification Number (ITIN). From a legal perspective, the responsible party controls, manages, or directs the applicant entity and the disposition of its funds and assets.
2. Choose Application Method: Non-U.S. citizens can apply for an EIN by mail, or by fax (yes, you read correctly, not by email or online). These options usually include delays for paperwork and processing.
3. Complete the Application: Fill out Form SS-4 and submit it to the IRS. Provide accurate information about your business, such as its legal structure and the reason for applying. The IRS website includes instructions and a series of questions to guide you through the full form.
4. Understand Responsible Party: Either an SSN or ITIN is required by the IRS to identify the responsible party of the EIN. The responsible party is an individual who controls, manages, or directs the entity. Non-citizens who do not have a SSN will need an ITIN. This involves submitting Form W-7 to the IRS.
5. Keep EIN Secure: Once obtained, treat your EIN like a confidential identifier. It will be essential for tax filings and banking purposes.
Non-U.S. citizens seeking to apply for an Employer Identification Number (EIN) encounter several hurdles throughout the process. Without a Social Security Number (SSN), foreign investors must obtain an Individual Taxpayer Identification Number (ITIN) before proceeding with their EIN application. Additionally, having a U.S. legal address is often a prerequisite, posing challenges for individuals without a physical presence in the country. US tax regulations are complex and can be difficult to understand, often requiring professional guidance to navigate. Furthermore, some non-U.S. citizens may encounter difficulties in opening a U.S. bank account without a valid EIN. The process itself, often conducted via fax or mail, can lead to delays and complications due to the potential loss or misfiling of documents, ultimately prolonging the already time-consuming procedure.
Best case scenario, the process can still take over a week. Even when the mail runs smoothly, there can still be issues with shipping, tech issues, handwriting not being clear, unexpected questions, special taxation requests, change of address, change of LLC name, etc. Delays of 6-7 weeks are not uncommon.
While obtaining an EIN as a non-U.S. citizen may present challenges, it's a critical step in establishing a business presence in the United States. Looking to effortlessly conquer the EIN challenge? Let Waltz take care of it for you with just a few clicks. Our Investor Kit streamlines the process of setting up a business entity tailored to your investment requirements, including an LLC with an EIN, and and operating agreement, all completed in just 20 minutes*. No need to navigate complexities alone - Waltz has you covered. Reach out to Waltz for professional guidance today.
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