Hi All,

I do not think a LLC can open a loan with one of its members social security number, is this right? It is not a single member LLC. The LLC needs to have its own TIN number, correct?

I believe you are correct. My understanding is that only a sole-member LLC can use the member's SSN.

http://www.bankersonline.com/operations/guru2004/gurus_op101804g.html

An LLC with more than one member must have an EIN. CIP requires that you get the correct number for the customer; an SSN won't cut it.

As I understand it, a SSN can also be used for a husband and wife-owned LLC provided they are the only members (owners) and own the business as community property, no other person would be considered an owner for federal tax purposes and the LLC or partnership is not treated as a corporation under IRS rules.

I'd say that's a STRIKE! BowlingQueen

We too put the individual's name on the first line for IRS reporting/matching for single member LLCS without a separate EIN. But then our system creates 2 CIF records, one for the individual and one for the LLC, which doesn't match if we also have a loan to the LLC.

Can I ask, do any banks require the single member LLC to have a separate EIN to open a deposit account? That would solve this problem, but I'm wondering if anybody requires it, or we all just deal with the titling/reporting problems?

I've never heard of a bank that "required" the customer to get an EIN when the IRS indicates an SSN is appropriate. I would question the judgment of anyone who did. The tail isn't supposed to wag the dog.

I'd like to be guided to something official in connection with the earlier statement that an H & W LLC can use the SSN of one of the members.

Yeah - the statements regarding a husband and wife LLC sure conflict with the information found on the IRS website:

http://www.irs.gov/Businesses/Small-Busi...ated-Businesses

Here is where it talks about H & W as a "single member" LLC if if formed in a community property state and they choose to elect to be formed as a disregarded entity:

http://www.irs.gov/Businesses/Small-Busi...ility-Companies


Joint Ownership of LLC by Spouse in Community Property States

Rev. Proc. 2002-69 addressed the issue of classification for an entity that is solely owned by husband and wife as community property under laws of a state, a foreign country or possession of the United States.

If there is a qualified entity owned by a husband and wife as community property owners, and they treat the entity as a:

•Disregarded entity for federal tax purposes, the Internal Revenue Service will accept the position that the entity is disregarded for federal tax purposes.
•Partnership for federal tax purposes, the Internal Revenue Service will accept the position that the entity is partnership for federal tax purposes.

So one more clarification: To eliminate the problem of having 1099 INT show the LLC name tied to the individual's SSN, we are titling the business checking account as:

Joe Smith, Member
Joe Smith LLC

I would prefer having the account titled Joe Smith LLC, but I can't put that on the first line of the deposit account, as that is how 1099s are pulled.

Does anyone see a problem with this deposit account set up?

You don't have to file a 1099INT on corporations, so isn't your question a little moot - whether or not it can be treated as a disregarded entity by the individual(s)?? The mismatches that occur on single member LLCs is an IRS problem and not the bank's. There is no reason to do all these gyrations trying to get a match.

Also, if you are talking about rules that are only applicable to community property States, it helps the readers to know that, as there are 41 other States that participate in these discussions.

Thanks rlcarey, I thought we sent out 1099INT for all customers, or maybe I'm confusing it with the report we get from the IRS for B Notices, thus the desire to have the SSN be reported for the individual not the LLC.

(and I didn't initiate the community property comment... just added a response. :-)

If you do send 1099-INTs out for LLCs and get a mismatch report from the IRS along with a letter with proposed penalties, the fact that the filings were not required under IRS rules will serve as a defense to the fines. But it's better, far better, to flip whatever status switch is available in your system to suppress the filings in the first place.

If the first four characters of the SSN owner's last name (SMIT here) appear in the name of the LLC it will match to the SSN used. Repeating the name of the individual is unnecessary. (Note that a single member LLC can also be owned by an entity and sport that entity's EIN.)

The mismatch issue arises only when the member's surname does not appear in the LLC name and the bank does not use the optional name control field on the 1099INT. Other name configurations have been discussed here and each has its drawbacks, perhaps the most important of which is that it may confuse your personnel as to the actual ownership of the account; e.g. when processing a levy in the name and TIN of the individual.

Thanks for the link. I note that it says an H & W LLC can be a disregarded entity, but it's ability to use the SSN of either member would have to be assumed because there is no statement to that effect.

We have encountered an argument between loans and deposits...shocking I know...regarding the titling of an account. Deposits insist that the sole member's name must appear on the first line of the LLC's DDA account, while loans says it does not have to be on the first line of the loan. The account in question is a single member LLC using the member's SSN. John Doe is the member and the name of the business is XYZ, LLC. Can the loan be titled XYZ, LLC? John Doe is a guarantor. Is there any regulation or guidance stating that it can or cannot?

We manipulate the titles of deposit accounts in order to show the IRS the name control assigned to the individual when we do information reporting on the 1099INT for the single member LLC. The loan you are discussing is not subject to information reporting.

In the case of a loan to an entity, it really doesn't make any difference. My suggestion would be that it's more important that the name assigned to the loan match to the name used on any security agreement and related filing.