EIN Responsible Party for a Business Entity
If you apply for an EIN, aka a Federal Tax ID Number, you will have to provide the IRS with what is known as a Responsible Party. Your LLC's responsible party manages, directs and/or controls the entity behind the EIN.
If there is technically more than one person running the entity, you can choose whichever one you want to serve as the IRS Responsible Party, since the IRS only requires a single Responsible Party. For example, in an LLC, the Responsible Party is the person who possesses the authority to oversee and control the finances and assets belonging to the LLC.
Keep in mind that the best choice for an EIN Responsible Party varies from one company to another.
Who Can Be a Responsible Party for an EIN?
To be clear, the Responsible Party must be an individual. Furthermore, no other person within the entity can make IRS-related changes other than the assigned Responsible Party.
IRS.gov defines the Responsible Party as:
For entities with shares or interests traded on a public exchange, or which are registered with the Securities and Exchange Commission, “responsible party” is (a) the principal officer, if the business is a corporation, (b) a general partner, if a partnership, (c) the owner of an entity that is disregarded as separate from its owner (disregarded entities owned by a corporation enter the corporation’s name and EIN), or (d) a grantor, owner, or trustor if a trust.
For all other entities, “responsible party” is the person who has a level of control over, or entitlement to, the funds or assets in the entity that, as a practical matter, enables the individual, directly or indirectly, to control, manage or direct the entity and the disposition of its funds and assets. The ability to fund the entity or the entitlement to the property of the entity alone, however, without any corresponding authority to control, manage, or direct the entity (such as in the case of a minor child beneficiary), does not cause the individual to be a responsible party.
Another way to think about the Responsible Party is as the contact person for the IRS. All communication (hard copies and digital versions) will be mailed to the Responsible Party listed on the EIN form.
How to Change the Responsible Party on an EIN
If the individual serving as the LLC Responsible Party is retiring, selling, or leaving the company for any reason, the new owners will want to choose a new individual as the Responsible Party. An entity can change its Responsible Party by filling out IRS Form 8822-B on the IRS website.
Just because you are the Responsible Party does not mean you are liable for any financial or legal issues in which the entity may become involved.
If you'd like to form you own LLC, you can start the process on our website and work with Harvard Business Services, Inc. as your Delaware Registered Agent.
*Disclaimer*: Harvard Business Services, Inc. is neither a law firm nor an accounting firm and, even in cases where the author is an attorney, or a tax professional, nothing in this article constitutes legal or tax advice. This article provides general commentary on, and analysis of, the subject addressed. We strongly advise that you consult an attorney or tax professional to receive legal or tax guidance tailored to your specific circumstances. Any action taken or not taken based on this article is at your own risk. If an article cites or provides a link to third-party sources or websites, Harvard Business Services, Inc. is not responsible for and makes no representations regarding such source’s content or accuracy. Opinions expressed in this article do not necessarily reflect those of Harvard Business Services, Inc.
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There are 5 comments left for EIN Responsible Party for a Business Entity
Jahongir said: Wednesday, September 14, 2022Can the Responsible Person be non citizen or non resident of USA?
HBS Staff replied: Monday, September 19, 2022Hello,
To obtain a Federal Tax ID for U.S. company the Responsible Person can be either a U.S. citizen or Non-U.S. Citizen.
HUMBERTO M said: Wednesday, October 27, 2021Can you recommend an accountant who speaks Spanish?
HBS Staff replied: Wednesday, October 27, 2021Hello,
Unfortunately we do not make recommendations. You can find accountants online who specialize in US taxation and filter out accountants who speak Spanish.
inette libolt said: Wednesday, December 11, 2019When we receive the EIN letter, it invariably is addressed to [Responsible Party's name] Sole Member. This person may be the Manager of the entity, the secretary of the general partner, but is rarely the Member. This causes all kinds of problems when trying to set up partnerships, obtain financing, etc. Any suggestions?
HBS Staff replied: Thursday, December 12, 2019Thank you for your question. This certainly sounds frustrating. It seems like perhaps the IRS has incorrect information on file or the initial responsible party information was submitted incorrectly. We would recommend contacting the IRS directly at 800-829-4933 for assistance. A tax professional may also be able to assist with this.
Mary said: Wednesday, May 15, 2019My situation is a little different. I would like to remove myself from a company my husband and I started a few months ago. We would also like to remove him from my company. Should i fill out the 8822-B if we are both listed as a manager on each other's company?
HBS Staff replied: Wednesday, May 15, 2019Mary - As far as Delaware is concerned, the updating of members/managers is handled within the company's internal records. The 8822-B form would be filed with the IRS if the responsible party information is changing. Typically there is only one responsible party per company.
Trevor said: Saturday, November 24, 2018If you file 8822-b changing responsible party from person 1 to person 2, does that remove person 1 totally from any obligations or liability ?
HBS Staff replied: Monday, November 26, 2018Form 8822-B is used to change the company address with the IRS and can be used to change the name of the responsible party as well. Only one person can be listed and can manage the company account with the IRS, but for liability concerns, it would be best to consult with an accountant or a tax specialist.