ITIN for Business Starters and Company Founders (and EINs too)

Why Do I Need an ITIN as a Business Founder?

As a company founder, you may wonder why you need an Individual Taxpayer Identification Number (ITIN). The reason is that in order to receive a Corporate Tax ID number (also known as an EIN or Employer Identification number), your company must designate a "Responsible Party." The designated "Responsible Party" for tax purposes must have a personal Tax ID number, which is an ITIN for non-Americans or a Social Security Number for US citizens.

An ITIN is not only useful, but sometimes required when performing certain financial activities such as opening commercial accounts or bank accounts, running payroll, and more. For example, a non-US business owner may need an ITIN to open a bank account or file taxes. Additionally, a business owner who has employees may need to obtain an ITIN to pay their employees and comply with tax laws.

Am I Required to Pay US Taxes if I Get an ITIN?

Company founders may also ask whether obtaining an ITIN means they are obligated to pay taxes in the US. The answer is no. Simply having an ITIN does not automatically require you to pay US taxes unless there is additional income received from the company, such as compensation as a shareholder or officer.

IRS Filing requirements are triggered by US financial events. In the context of starting a company, you may be an owner or shareholder or serve as an Officer or Director. If the Company makes payments to you, IRS rules may require the Company to withhold a portion as withholding tax and file a report with the IRS. The Company will need an ITIN from you to ensure you get proper credit for the withholding tax.

The assignment of an ITIN does not by itself mean that you will have to pay taxes or file a tax return. It's just an account number assigned to individuals.

The IRS acknowledges that company founders may require an Individual Taxpayer Identification Number (ITIN), even if they do not anticipate filing a personal tax return. This particular application category is called "Third-Party Withholding." To obtain an ITIN without filing a tax return, we can draft a letter from the company to the IRS using a template that adheres to the exact language specified by the IRS. It is important to note that this request letter does not mandate that the company make any payments to you, nor does it initiate any tax reporting obligations.

When you apply for an ITIN with our help, we prepare the Application Form and Supporting letter for you.

Be sure to get qualified advice on whether and when you need to file a report with the IRS, based on your personal circumstances. This article is no substitute for such advice.

What is a Responsible Party?

The IRS defines a "responsible party" as the individual or entity that controls, manages, or directs the entity and the disposition of the entity's funds and assets, unlike a nominee, who is given little or no authority over the entity's assets. Read more here.

Although the ITIN is only an ID number, when you form a US company, you are undertaking legal and tax responsibilities. When you get a tax ID for your company (called an EIN), the company must nominate someone to serve as the IRS-designated Responsible Party. This role requires the individual to have a US Tax ID number (called an ITIN).

You can see the IRS definition of "Responsible Party" here.

Keep the IRS updated about changes in the Responsible Party. More information here.

Responsible Parties

All EIN applications (mail, fax, electronic) must disclose the name and Taxpayer Identification Number (SSN, ITIN, or EIN) of the true principal officer, general partner, grantor, owner or trustor. This individual or entity, which the IRS will call the "responsible party," controls, manages, or directs the applicant entity and the disposition of its funds and assets. Unless the applicant is a government entity, the responsible party must be an individual (i.e., a natural person), not an entity. If there is more than one responsible party, the entity may list whichever party the entity wants the IRS to recognize as the responsible party.

In summary, the ITIN by itself is simply an account number. However, in forming a US company, you are undertaking US legal and tax responsibilities.

We Get EINs

When we apply for your ITIN, we can obtain the EIN for your company too, often same day as we ship your ITIN application to the IRS.