ITINs, EINs, and Responsible Parties
In order to open a bank account for your business entity, you have to present Articles of Organization/Incorporation and an EIN, which is an Employer Identification Number issued by the IRS. In order to apply for an EIN number, you have to supply the EIN, ITIN, or Social Security Number of a “Responsible Party” for your business. The IRS defines “Responsible Party” as “the true principal officer, general partner, grantor, owner, or trustor; someone who controls, manages, or directs the entity and its assets.”
If you aren’t a US citizen and therefore don’t have a Social Security Number, you’ll have to apply for an Individual Taxpayer Identification Number or ITIN. The ITIN is normally issued with the filing of the entity’s first year’s tax returns, but because the entity likely needed to open a bank account long before then, to transact the very business it would report on the tax return, we run into a chicken-or-the-egg situation. Last we checked, the process of applying for an ITIN upon the forming of an entity takes a minimum of six weeks and has to be routed through an Acceptance Agent, who is itself registered with and approved by the IRS to take these applications.
We’ve found that sometimes, a CPA will act as the Responsible Party to obtain the entity’s EIN and then, once the ITIN has been issued, will replace themselves with the proper Responsible Party by filing Form 8822-B. However, the IRS strongly cautions against the filing for an EIN using the SS# or EIN of anyone other than a principal of the entity, even someone the entity has designated a nominee or authorized representative.
So, if you’re a non-US citizen who, for example, is in town for 48 hours and wants to set up an entity and open a bank account, you’ll have to contact an Acceptance Agent first, and practice some patience.
UPDATE: The Protecting Americans from Tax Hikes (PATH) Act of 2015 provides that any ITIN not used on a federal tax return at least once in the last three years will no longer be valid for use starting January 1, 2017. Make sure to check the IRS website for instructions on how to renew your ITIN.