International entrepreneurs from around the world use US LLCs in order to expand their business, give their business more credibility, or simply enter the US market. It doesn’t matter what your business dream looks like — in order to see it come true, you’ll need to jump through a couple of hoops, and start a US company by opening an LLC. And that includes getting an EIN without SSN.
An EIN without an SSN, we hear you ask? Yes, absolutely. Nonresidents and foreigners don’t need an SSN in order to get an EIN and ultimately become owners of their very own US LLCs.
Opening an LLC might seem like a hassle but it’s worth it because it allows you to do business on US soil. There are two different reasons why you might want to open an LLC:
- To have a US company that generates a non-US surced income (such as an offshore online business that’s essentially tax-free), or
- To have a US company with a US-sourced income (like a business venture or a real estate investment business that receives a passive rental income).
An EIN is a federally-issued verification number that all businesses in the US need to have. Therefore, nonresident or not, you need to have your own EIN before you can execute any sort of business dealings or transactions.
Today, we’re diving deep into the subject of EIN and shedding some light onto topics such as:
- What EINs are and why non-US citizens need them,
- Which foreigners need EINs,
- The advantages of having an EIN for foreigners,
- The process of acquiring an EIN, and
- The differences between EIN and SSN as well as EIN and ITIN.
Let’s get to it!
Understanding the Employer Identification Number
An Employer Identification Number, commonly known as EIN, is a crucial identifier issued by the Internal Revenue Service (IRS). This 9-digit number is issued to every business owner, organization, or business entity in the US, and they all use it when reporting and declaring taxes.
Therefore, no matter what type of business you’re planning on having in the US, you’ll need to acquire an EIN.
So, as we said, EIN serves as an identifying number but it’s different in nature to both SSN and ITIN. Unlike both of these numbers, an EIN serves to identify a business entity. Therefore, it has nothing to do with you as an individual but rather identifies your business as a taxable entity.
There are 9 digits in total in an EIN. The first two identify which campus assigned the EIN — there are 10 different campuses (and one of them is the Internet, for those who establish their businesses online).
Who Needs an EIN?
If you’re an online entrepreneur with a tax-free US LLC, a business owner with a US-sourced income, or an aspiring nonresident investor, then you should know that getting an EIN is vital. It’s what makes it possible for you to do business — without it your LLC isn’t a valid business entity.
However, it’s not just online entrepreneurs with a tax-free US LLC who need an EIN. All investors and business owners who have a US-sourced income (passive or otherwise) need this number also.
Companies that have employees, that operate as corporations or partnerships, or file tax returns need an EIN. In other words, you need it if you have a:
- C and S corporation,
- Sole proprietorship,
- Partnership, or an
Some of these are common-sense while others may surprise you. For example, not everyone knows that NPOs require an EIN, but it’s a mandatory requirement in order to be granted a tax-exempt status.
Do I need an EIN for my US LLC?
If you plan to have a US LLC, you need an EIN — even if you don’t plan on having any US-sourced income. For starters, without an EIN, you won’t be able to get a US bank account and start using your LLC as the vessel for your tax-free business or your investment business.
You must file for an obtain an EIN if you:
- Have employees,
- File tax returns,
- Have a partnership or a corporation (LLC multi-member partnership included), or
- Have dealings with different organizations such as trusts, NPOs, or estates.
As a nonresident, you need an EIN do business in the US — especially if you’re opening an LLC.
Advantages of EINs for Foreigners
First and foremost, an EIN allows you to separate your personal and professional finances. If you’re thinking of going the LLC route, then you’re already aware that by opening a Limited Liability Company, you’re essentially creating a business entity that will be held liable for any and all wrongdoings in business, while your personal assets will remain protected.
In order to enjoy that protection, you need an EIN — that’s the only way for the IRS to see you as a business entity and offer you these protections.
Aside from that, other benefits of having an EIN are:
- Opening bank accounts — You need an EIN in order to open a business bank account. That will give you access to the US market, as well as US-based payment processors and banks. Without a bank account, your LLC can’t do any business.
- Tax compliance — all business entities need to file taxes and your EIN allows you to do that.
- Tax benefits — foreigners looking to have a tax-free US business by opening a US LLC, need an EIN in order to file form 5472 for disregarded entities.
- Applying for business loans — For example, with an EIN, you’ll be able to apply for a DSCR loan, which is ideal for foreign investors. Having a US LLC allows you to enter the US real estate market and enjoy the same rights as American citizens — including getting an investment loan without a credit score.
- Hiring employees — Without an EIN, you won’t be able to hire employees to work for your business, since you need an EIn to manage taxes regarding payroll as well as social security, and health insurance.
- Building a credit score — Although yu can build personal credit score with an ITIN as well, to build your business credit, you will need an EIN instead.
How to Get an EIN without SSN as a Foreigner
Now that we’ve gone over the basics — and determined that nonresidents definitely need EINs — we can go into the details of acquiring an EIN.
On the surface, getting an EIN is simple. You can do it in person or online as well as via phone or fax. The one thing you will need is the SS-4 form — the Application for Employer Identification Number.
This application is vastly different for residents and nonresidents, which is something you have to pay close attention to.
When you fill out the SS-4 form, you need to provide the following information:
- What type of business entity you need the EIN for,
- The reasons you’re applying for the EIN,
- The start date of the entity you’re applying for, and
- The industry of your business.
Sounds simple, right?
And, yet, around 50% of EIN applications get declined due to people messing up the forms.
Getting rejected isn’t a big deal and the IRS will even tell you which information you filled in improperly or incorrectly. Still, you might need to reapply a couple of times, which is why we suggest getting professional help. With someone experienced there to guide you, you’ll nail it on the first try.
Here at Nonresident Investor, we have specialized team members who have been through the process of applying for EINs for our non-US clients many times and they will happily give you a hand and ensure you only have to fill the SS-4 form once.
Along with the SS-4 form, as a nonresident, you need a US-based address or a registered agent who will handle their IRS correspondence as well as the necessary paperwork proving the existence of your LLC. You need to send all that paperwork to IRS online via fax (if you’re outside of US) or regular mail (if you’re residing within the US).
After 2 to 3 weeks,the IRS will either send you your EIN or send you a letter explaining why you’ve been rejected (after which you can fix your mistakes and reapply).
Once you have your EIN, you’ll be able to open a business bank account and carry out transactions.
EIN for Foreigners: EIN vs SSN and ITIN
One of the first questions our foreign clients as us is, “Can I apply for an EIN without an SSN?”
The answer is — YES.
A lot of nonresidents, esspecially those who are just staring to find their way in the vast business market of the US, get EIN confused with the Social Security Number as well as ITIN (Individual Taxpayer Identification Number) or think they absolutely need an SSN in order to get an EIN.
Although this isn’t uncommon, it’s vital to understand the difference between these numbers as well as when to use which one in order to stay compliant with US laws (esspecially tax laws).
There are a couple of key differences between EIN and SSN and EIN and ITIN.
For one, the SSN (Social Security Number) is a personal identification number issued by the Social Security Administration to every American citizen and registered alien who use this number to report and file personal taxes. Similarly, an ITIN is a personal identification number that nonresidents and resident aliens use to file personal taxes.
The EIN, as already explained, is used for business taxes only. So, if you have a business (that isn’t a disregard entity but is an entity separate from you as a natural person), you must file taxes for it and you can’t do that with an SSN or an ITIN.
Related: What is the difference between ITIN and SSN?
Need an EIN without SSN: The NRI Team Is Here for You
Acquiring an EIN can be a difficult task, especially if, as the saying goes, you haven’t been around the block a few times. The process of applying and reapplying (in case you mess something up) is tedious.
Luckily, it’s also easily avoidable!
Here at Nonresident Investor, we understand that you don’t have the time (nor the patience) to painstakingly fill out form after form. That’s why we do it for you! We offer a full range of services that include:
- Filling out and filing paperwork for the EIN,
- Opening an LLC for you, and
- Helping you acquire your own business (and personal) bank account!
So, don’t worry about your EIN — our experts will not only fill out all the paperwork for you but we’ll also file it and deliver it to you in no time! With a fool-proof protocol and years of experience inthe business, we’ll have everything done before you can say: “Where’s my EIN?”
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