A W-9 is a tax form used to provide information such as a Social Security number or employer identification number to someone who is paying you. If you are doing business with someone as an independent contractor, they may ask you to file a W-9. The W-9 form can be filled out by individuals, as well as corporations and limited liability companies, and there are specific sections on it pertaining to LLCs.Whether or not you have an LLC, many companies will ask you to fill out a W-9 when doing work for them so that they have your information or your company's information on file.
Regardless of whether you are operating as a sole proprietorship or LLC, you may be asked to complete a W-9 form by the employer who is paying you.
Limited Liability Companies
A limited liability company is a type of corporate organization that, as the name suggests, limits the legal liabilities of its owners, typically referred to as members. They're generally easier to set up than corporations but provide more protections in case the organization is sued than less formal partnerships or sole proprietorships. LLCs with only one member, or owner, can choose to be treated like corporations for tax purposes. Otherwise, they're effectively "disregarded," in IRS terminology, and simply handled as part of the owner's tax return.
Form W-9 Considerations
If someone is paying you to do work as an independent contractor and will pay you more than $600 in the course of a year, they are generally required to file tax form 1099-MISC with the Internal Revenue Service indicating how much they paid you. That form requires the payer to supply your taxpayer identification number, such as a Social Security number or EIN. Form W-9 allows the payer to legally request this number from you, as well as information such as your address and legal name.
The form also inquires as to the nature of your business, such as whether you're doing business as an individual or sole proprietor, as a partnership, as an LLC or as one of various types of corporation. If you are doing business as an LLC, the form will also ask information about how your LLC is taxed and whether it's a single-member LLC.
Not Filing Form 1099-MISC
If a company is required to file a 1099-MISC form reporting payments to you and fails to do so, it can face penalties from the IRS. For this reason, many companies require W-9 forms from all vendors, including corporations and LLCs that may not have to receive 1099s, as a legal precaution. Generally, single-member LLCs that are legally treated as a single person do need to receive 1099s, while other forms of LLCs and corporations do not.
Generally, there are penalties for not filing legally required 1099-MISC forms, but not penalties for filing them unnecessarily. For this reason, some companies may choose to file 1099-MISC forms for anyone they do business with and especially for LLCs, in case there has been a miscommunication about how they need to be treated.
Understanding Privacy Risks
If someone asks you to fill out a W-9 form, they're effectively asking you to trust them to safeguard the information on it, including your personal or business tax identification number and your contact information.
Filing the form may be a requirement to do business with someone, but if you realize you feel uncomfortable providing that information, it can be worth considering why you have that discomfort and whether you want to continue building that business relationship.
- IRS: Form W-9
- IncFile: Do LLCs Get a 1099 During Tax Time?
- Investopedia: The Purpose of the W-9 Form
- Kerkering Barberio: Do You Have a W-9 From All Vendors?
- Due: W-9 For Payments
- IRS: Instructions for Form 1099-MISC
- LegalBeagle: Definition of an LLC Member
- Investopedia: Limited Liability Company - LLC
- IRS: Single Member Limited Liability Companies