We have a situation:
We approved a real estate loan to ABC LLC. ABC LLC is 100% owned by XYZ LLC. We are told that ABC LLC is a disregard entity. ABC has no EIN# and like to use XYZ EIN #. I know if ABC is owned by an individual, we can use owner’s SSN as TAX ID. In my case ABC is not owned by an individual, it's owned by another LLC. Is it still automatically considered a “disregarded entity” or the customer need to file with the SOS to have the LLC considered “disregarded”?

Thank you very much for any feedback/comments!

Why do you care if it is a disregarded entity or not?

Sorry, I did not explain it clearer in my previous post:
because ABC has no EIN, they want to use XYZ's EIN.
We don't have this very often so like to know how to handle this and how to style account title.
Thank you!

Is it still automatically considered a “disregarded entity” or the customer need to file with the SOS to have the LLC considered “disregarded”?

That is a State law issue and has nothing to do with EIN's which is an IRS issue. If ABC is a single member LLC and is not required to pay payroll taxes, I believe they do not need a separate EIN.

Thank you, Randy!

For this situation, do we take customer's words stating ABC is a disregarded entity or is there any documents we can obtain to show ABC is a disregarded entity?

by chance, do you know how other banks style the account like this? I am thinking we may have IRS mismatch Issus.
Owner's name (XYZ on the first line) and the ABC LLC on the 2nd line?

Appreciate your time!!

if it is a single member LLC it is a disregarded entity.

You are concerned with the tax id status?

The customer is required to put the the correct number on W-9, The bank should not get involved with providing tax advice to the customer.

sorry.

If using the TIN of XYZ LLC, you could style it

XYZ LLC sole member of
ABC LLC

The problem with that approach is that there is only one owner of the account: ABC, LLC. XYZ, LLC does not own the account. The bank should not accept checks payable to XYZ, LLC for deposit into the account. The bank should not issue 1099s in the name of XYZ, LLC; they should be issued in the name of the account owner, ABC, LLC. If it is a disregarded entity (for tax purposes), there will be no problem with the TIN (no more than there would be if the LLC were owned by John Doe and used John Doe's TIN).

If the bank does something that makes it look like XYZ, LLC actually has an ownership interest in the account, the chances for employee error increase dramatically.

The purpose of including XYZ in the styling of the account is to allow for a name/TIN match. I agree that it's problematic, because tellers could be confused by it, and others might mess things up if a subpoena, for example, were to be received for documents on accounts of XYZ.

Of course there is some question whether a 1099-INT should be generated for an interest-bearing account of an LLC. Is it exempt, like a corporation? I'm not a tax expert, so I won't venture an opinion.

Most up-to-date systems include the ability to designate the name and TIN to report with more finesse than just using the first line of the name and address setup. Banks should be using that ability to ensure name/TIN matches rather than forcing a phony "owner" into the styling.

Totally agree with this.