LLC Tax Classification W9: Everything You Need to Know
The LLC tax classification W9 refers to the IRS form used by LLCs when working with independent contractors and vendors. This form, titled the W-9 form, must be completed by the LLC owner and provided to the vendor or contractor.3 min read
What is IRS Form W-9?
The LLC tax classification W9 refers to the IRS form used by LLCs when working with independent contractors and vendors. This form, titled the W-9 form, must be completed by the LLC owner and provided to the vendor or contractor. The completed W-9 form will include the taxpayer ID number, business address, legal business name, and the tax classification of the company. Additionally, the W-9 form requires certification about whether the business is subject to backup withholdings. If this is the case, the business owner must withhold some of the company's income and transmit the funds to the IRS.
Upon completing the form, you do not need to file it with the IRS, but it must be kept with other related business records. When preparing any 1099 forms, the business owner should use the information included on the W-9.
Instructions for an LLC Using IRS Form W-9
When filling out the W-9 form for the first time, you might find that the information is confusing and the form is difficult to complete. In fact, you may not make it too far past the first part of the form.
The first box on the form instructs you to check the appropriate box based on federal tax classification. The classification options are:
- C Corporation
- S Corporation
- Individual/sole proprietor
- Limited liability company (LLC)
If your company operates as an LLC, follow these steps for that section of the W-9 form:
- LLCs that elect to be taxed as S corporations by completing IRS form 2553: check the LLC box and write “S” in the blank space next to LLC
- LLCs that elect to be taxed as C corporations by completing IRS form 8832: check the LLC box and write “C” in the blank space next to LLC
If your LLC has not filed either of the IRS forms, follow these rules:
Assuming your LLC has a single owner, by default the business is a disregarded entity in terms of its tax status. A disregarded entity refers to a business that exists separately from the owner for liability and legal purposes, but not for taxation purposes. If a single-member LLC doesn't file either IRS forms for taxation as a corporation, the default taxation is the same as a sole proprietorship.
When completing the next part of the W-9 form, put in your name, the name of the business, and the legal business address in each box. If your LLC has one owner, mark the box next to individual/sole proprietor. If your LLC has two owners, mark the box next to LLC and write “P” in the blank space next to LLC. If your LLC is owned by another LLC or other business, these steps and rules would not apply. You would need to consult with a tax professional, such as a tax attorney or CPA to fill out the form correctly.
Form W-9 LLC Classifications
An LLC can use one of multiple classifications for federal tax purposes. Certain types of LLC classifications come with their own regulations. For example, one classification might require all owners of the business to file an IRS form in order to elect the tax status. Other classifications will typically apply default rules and tax treatments based on how many owners exist in the LLC.
You can form an LLC legally under the laws in your state. This business entity is a hybrid option that blends aspects of partnerships and corporations. The owners of an LLC are called members, although this type of business can have just one owner or an infinite number of owners. The federal tax laws don't include the specific classification for taxation of an LLC.
Instead, the IRS will treat the LLC like a disregarded entity for income tax purposes. It also assigns one of the two tax classifications to the LLC by default. The classification is determined by the number of owners within the LLC. The first classification is sole proprietorship, which is also the default if your LLC has one member. If you have more than one member in your LLC, the classification will be a partnership. Under both classification options, your LLC's losses and profits must be reported on the tax returns of each individual member.
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