How to Complete The IRS Form W9 as LLC and avoid Backup Withholding?

If you’ve just started a limited liability company or has become its member you may stuck when reporting your income. Say you’ve downloaded your W9 form online free of charge and are ready to complete it. Don’t be in a rush. Read the instructions first. Here is what you must pay attention to:

• How your company is classified

The first thing you need to specify is what type of LLC you are. The suggested options are: S-corporation, C-corporation, trust estate or a partnership. Simply check the appropriate box and indicate the name of the company and its ID. If none of the options fits you, there are other questions on your free fillable W 9 that will help you identify LLC tax status.

• Is it a single-owner LLC?

You can’t leave the LLC as a disregarded entity. So even if you’ve skipped the first boxes further on the form you will have to identify LLC tax status. If it’s owned by one person it will be classified as a sole proprietorship. You must provide the owner’s name, and his SSN.

• If the LLC is owned by two members

If there are two people owning the LLC then it’s classified as a partnership. For the partnership you must file Form 1065 that reports partnership income to the IRS.

• If the LLC is owned by another business

LLCs owned by business are classified as LLCs. But in this case you must specify tax status of the company that owns the LLC.

If you provide inaccurate information or even leave some fields blank, you may be subject to backup withholding. Generally all U.S. citizens and businesses are exempt from backup withholding unless

• They’ve reported incorrect TIN
• The IRS has received wrong TIN
• They’ve failed to report the full amount of dividends and interest on their income
• If they’ve been notified by the IRS about being a subject to backup withholding.

You can avoid backup withholding by providing correct information to the payer.