Setting up your LLC, EIN & ITIN

Setting up your LLC.  I don’t intend to go in to the pros and cons of setting up an LLC.  All I can say is that as an Australian investor purchasing property in the US this way of purchasing property (for me) seems to be the most efficient and beneficial structure.  How?  A lot of foreign investors do it themselves online.  I suggest asking your attorney as I did – a company can be set up overnight.  In fact, I was in a rush, it took my attorney a little over two hours for the initial set up.  Again, I would suggesting paying more for an attorney you can meet or talk to – finding someone reliable will make sure he/she keeps up to date with the latest legislation/amendments, company minutes and maintains stringent company documents.  Online you can set up an LLC for around $1000 – $1500. Total cost of LLC set up for me was $2,500.

 

Setting up an EIN.  Employer Identification Number. Remember the part I said about “stress” above? Here it is. Both an EIN and ITIN are essential in US property purchase (assuming you set up an LLC) and the lovely bureaucracy of Uncle Sam, coupled with (sometimes) poorly trained IRS staff and complex IRS documents, makes both of these difficult to set up.  As an example, you can’t set up an ITIN without purchasing a property, you can’t purchase a property without an LLC, you need an LLC to get an EIN, but to get an EIN for your LLC you MUST have an ITIN number.  To get the ITIN number you’ll need to be in the US physically to set up a back account, to get a letter from the bank stating that you require an ITIN number for tax purposes from the IRS – wait; now the bank is saying that it can’t set you up with a bank account without a Social Security Number (SSN) or ITIN. What !!!

The above is an example of what happened to me in my attempt to do both prior to leaving for the US.  Some of the above ‘conditions’ are true but most of what I said above was passed on to me directly from speaking with IRS staff and Wells Fargo & Bank of America staff. Essentially, here’s an easy explanation of what I did after advice from my attorney;

 

1. Set up an LLC (attorney did this)
2. Get all your company documents together
3. Make sure you attorney acts as the ‘Registered agent’ (he/she will understand)
4. Make sure you have your US mailing address set up (see below)
5. CALL the IRS to ask for an EIN – reason; you can’t apply for an EIN using their online service without a SSN or ITIN.
6. If possible, be near a fax machine to receive confirmation (otherwise paperwork can take quite some time to reach you).

Notes:
* To get an EIN is a free service.
* Most IRS staff will turn you down without a SSN or ITIN – you need to be assertive as you DO NOT need either of these to get your EIN number.
*If you are using an online service, they may be able to get an EIN for you – just be careful with costs associated of using an online ‘registered agent’ for your LLC, after 3-6 months there will usually be an ongoing cost for this.

 

Setting up your ITIN.  Setting up your Individual Taxpayer Identification Number (ITIN) is no easy feat.  Don’t be fooled by what might seem like an easy 1-page application form (form w-7) or think the 8-page instruction form will be of any real use to you (IRS instructions).  Your ITIN application is fairly complicated, I have been rejected twice so far.

Use the instruction form provided by the IRS to complete your application. I have been instructed by my US accountant to wait until I purchase a property to apply for my ITIN.  Once I purchase a property, i’ll be able to obtain a letter from my property management company saying that I require an ITIN as I will be receiving property investment income.

If you are in the US and at the bank, you may want to open an interest bearing (business) bank account – the bank can then issue you a letter to the IRS stating you require an ITIN.

You’ll also need to get an ‘Apostille’ on your passport by an authorised public notary (try http://www.notarylocator.com.au if you’re in Australia, similar online services are available for other countries).  To save money, I did this while in the US – free to notarise your passport if you’re a Bank of America customer or around $10/page at any UPS store. Until my application is completely accepted, I won’t post a step-by-step guide on each question in the ITIN form in case information I give is incorrect.