I have read several threads and articles on BOL about this situation - a particularly good one from John Burnett in June 2007. But I am still unsure how to title a deposit account involving two LLCs to properly report to the IRS (name and EIN match). Do you set them up as a DBA and if so, should you also require a ficticious name affidavit like you typically would when sharing a EIN? And what about an LLC and a corp. where they want to use the EIN of the corporation - is it still a disregarded entity? And in the case of a mtg loan relationship, can the LLC use the EIN of a corporation who is not a part of the loan? The customer is claiming they can use the others EIN because they are a disregarded entity - I say not so fast. What am I missing? (I appreciate your help with this multi-part question.)
I can answer the last one. You can't or definitely should not be making loans to disregarded entities in the first place. They, as you have pointed out, do not exist except maybe on some type of assumed name certificate.......
The opinions expressed are my own, take them or leave them.
John Jones, sole member of Jones LLC. The LLC has the option, under IRS rules, to be treated as a corporation, in which case it must obtain its own EIN and file its own annual tax return; or be treated as a disregarded entity, in which case the LLC can use John Jones' SSN as its TIN, and does not have to file its own annual tax return (John Jones reports its income and expenses as if it were a sole proprietorship).
ABC Corporation, sole member of ABC LLC. The LLC has the option, under IRS rules, to be treated as a separate corporation, in which case it must obtain its own EIN and file its own annual tax return; or be treated as a disregarded entity, in which case the LLC can use ABC Corporation's EIN as its TIN, and does not have to file its own annual tax return (ABC Corporation files its return that includes the income and expenses of ABC LLC as if it were a division rather than a separate entity).
Jones LLC (see above) is a sole member of Jones II LLC. Jones II LLC may be treated as a corporation under IRS rules and obtain its own EIN, and file its own return; or it may use the TIN of Jones LLC, which may be an EIN assigned to Jones LLC or the SSN of John Jones.
In each scenario, the LLC is a separate legal entity regardless of whether it has opted to be a disregarded entity for IRS purposes.
When structuring loans to LLCs or any other complex arrangement, it's a good idea to have an attorney involved.
Edited by John Burnett (01/18/1112:43 PM)
_________________________ John S Burnett BankersOnline.com
So let's see if I have this right for deposit accounts: #1 If the LLC does not have its own EIN, title the account John Jones DBA Jones LLC (use John's SSN). #2 If ABC LLC does not have own EIN, title the account ABC INC, DBA ABC LLC (use the EIN of ABC INC); and #3 If Jones II LLC does not have own EIN, could title the account Jones LLC, DBA Jones II LLC (use Jones LLC's EIN) or John Jones DBA Jones II LLC (use John's SSN). How'd I do?
So that I don't send someone astray I have found out that you do not title these types of accounts as a DBA. The name and the EIN may not match but as a sole member LLC it can be considered as a disregarded entity of another LLC (just as John explained). Have the sole member certify the EIN of the LLC.