Many people looking to start a business in the US—especially non-US residents—assume they need an Individual Taxpayer Identification Number (ITIN). After all, if you’re planning to do business in the US, it seems logical that you’d need some form of ID for tax purposes, right? But here’s the thing: you probably don’t need one to open a US LLC.
In this post, we’ll explain what an ITIN is, who needs one, and whether or not you need it to set up your US business. Let’s dive in!
What is an ITIN?
An Individual Taxpayer Identification Number (ITIN) is a unique nine-digit number issued by the US Internal Revenue Service (IRS). It’s used primarily for tax purposes by individuals who are required to file a tax return in the U.S. but aren’t eligible for a Social Security Number (SSN).
It is purely for reporting taxes. While both an ITIN and an SSN are used to identify you in the US tax system, they are different.
U.S. citizens and authorized residents, e.g. visa holders, can obtain an SSN. Non-citizens, including foreign nationals, non-resident aliens, and their dependents, don’t qualify for an SSN. They must use an ITIN to report income to the IRS
Now, you might think that you need an ITIN if you want to open a US business. But that’s not always the case.
Do you need an ITIN to open a US LLC?
The short answer is no, you don’t need an ITIN to open a US LLC. Here’s why:
Non-US residents can form a US LLC without having an SSN or ITIN. The US allows foreign nationals to own and operate businesses without needing to personally reside in the country.
What you do need to open a US LLC as a non-US resident is the following:
- EIN (Employer Identification Number): You don’t need an ITIN, but you will need an EIN to run your LLC, even if you’re the only owner. The EIN acts as the business’s tax ID number and is used for things like opening a business bank account, hiring employees, and filing taxes. This can be obtained online through the IRS. (More about this below.)
- Registered Agent: A registered agent is someone who will act as the point of contact for legal and official documents (like service of process). If you’re not based in the US, you’ll need to hire a registered agent in the state where your LLC is registered.
You don’t need a passport to open an LLC, and some like Wyoming don’t even require a name of the owner. However, a passport is required for opening a bank account. You will also need to share your passport information for the required BOI filing (if those get reinstated).
You don’t need to have a US business address to open an LLC. But you will need one to open the business bank account for your LLC. Read more about opening a US business bank account.
Every business entity must be documented, a US LLC is no different. The following two documents are not required to open the LLC but are the required output of registering your LLC.
- Articles of Organization: This document officially creates your LLC and outlines the basic information about the company, such as its name, address, and structure. The state issues this document once the LLC is formed.
- Operating Agreement: An LLC Operating Agreement is required after the LLC has been formed. This document outlines the management structure, duties of members, and how profits/losses will be shared. This is an internal document that is not filed with any authority.
Check out our in-depth guide to opening a US LLC from abroad.
So, can you open an LLC without an ITIN? Absolutely!
ITIN vs. EIN: What’s the difference?
As you see, you will need an EIN, not an ITIN. But what is the difference? While they both serve as identifiers in the US tax system, they have very different purposes.
- ITIN: The ITIN is for individuals who need to report taxes to the IRS but do not qualify for a Social Security Number (SSN). It’s primarily used for personal tax reporting. If you are a non-US resident who needs to file taxes or claim tax benefits (for example, reporting income from a foreign-owned LLC), you would use an ITIN.
- EIN: The EIN is for businesses. It’s a unique nine-digit number used to identify your business entity (like an LLC or corporation) for tax purposes. You’ll need an EIN to open a business bank account, hire employees, or file business taxes. Even if you are the only owner of your LLC (a single-member LLC), you will need an EIN to operate your business legally.
In short, the ITIN is for individuals and the EIN is for your business entity.
Individuals include business owners or foreign nationals who need to file personal tax returns. If you only need to file a business tax return, you won’t need an ITIN.
When do you actually need an ITIN?
While you don’t need an ITIN to form an LLC, you may need one when it comes to taxes.
Typically, foreign-owned single member LLCs that provide services to US clients are tax free in the US. However, if you sell physical products to US customers, you likely have “US-source” income, on which the US imposes tax. Read our Ultimate guide to LLC taxation for more information.
If you are a non-US resident and the LLC generates US-source income, you will need to file Form 1040-NR (Non-Resident Income Tax Return). In order to file this form, you need an ITIN, as you don’t have a Social Security Number.
For many e-commerce businesses, forming a C corporation may be more tax beneficial. (If you’re unsure what makes more sense for you, we can help you navigate and evaluate the options.)
Now, if you receive dividends from the C corporation and the C corp does not withhold taxes on your behalf, then you will need an ITIN to file your Form 1040NR.
Who else needs an ITIN?
Besides US business owners, there are a few common scenarios where an ITIN is required to comply with US tax laws.
Non-residents that:
- Earn rental income or other income from US sources.
- Receive passive US income like dividends or royalties, where tax has not been withheld by the withholding agent.
- Claim tax treaty benefits.
In short, if you need to file a US tax return, report US-based income, or claim certain benefits and exemptions, you may need an ITIN.
How to apply for an ITIN (if you really need one)
If you later find that you need an ITIN, here’s the application process:
- Complete IRS Form W-7: This form is specifically for ITIN applications. You can find it on the IRS website.
- Submit Identification: You must provide documents like a passport, foreign birth certificate, or national ID card to prove your identity.
- Mail the Application: Send your completed W-7 form and documents to the IRS. You can also apply through an IRS-approved Acceptance Agent.
- Wait for Your ITIN: It usually takes around 7 weeks for the IRS to process your application and send you your ITIN.
Conclusion: Do you really need an ITIN?
The bottom line is that you don’t need an ITIN to open a US LLC. If you’re a non-US resident starting a business in the US, you can form your LLC and get started without worrying about an ITIN.
However, if you plan to earn income from the LLC or want to hire employees, you may need an ITIN to file taxes later on. Until you have the LLC and you start the filing process of your first 1040NR tax return, which happens the next year, you can’t even do anything about it.
For now, focus on getting your LLC set up and worry about the ITIN only when the time comes.
Starting a US business as a non-resident is easier than you might think—an ITIN isn’t a barrier.
Launch your US company from home. No paperwork headaches.
We’ll handle it all for you.
