An entity operating in the U.S. needs a U.S. Federal employer identification numbers (“EIN”) in order to open a bank account in the United States, act as an employer, file a tax return and complete certain other corporate tasks.
As of May 13, 2019, entities, other than governmental entities, applying for an EIN must list an individual as the responsible party on the application and in some instances must provide that individual’s Social Security number (SSN) or individual taxpayer identification number (ITIN). Prior to this, common practice had been to list an entity that already had an EIN (such as a parent entity) as the responsible party.
A responsible party is defined as the person who ultimately owns or controls the entity or who exercises ultimate effective control over the entity. The person identified as the responsible party should have a level of control over, or entitlement to, the funds or assets in the entity that, as a practical matter, enables the person, directly or indirectly, to control, manage, or direct the entity and the disposition of its funds and assets. In the case of a publicly-traded corporation, the responsible party would be a principal officer of the corporation. Based on this definition, it appears that third party designees, such as attorneys, would not qualify as responsible parties.
Although there seems to be some confusing on this point, at least for now, a nonresident foreign individual that is the responsible party does not have to provide an ITIN if their only reason for applying for the ITIN is to obtain an EIN for an entity. (A foreign individual will actually be unable to obtain an ITIN if that is their only reason for needing one). In that instance, the responsible party would write ineligible on the form in the place where a SSN or ITIN is usually provided.
To obtain an ITIN and individual must file a Form W-7 with the IRS and provide supporting original documentation to verify the individuals identity and foreign status. Applications may be made in person to a Certifying Acceptance Agent (many of the large accounting firms are such agents). The timeline for receiving an ITIN can be long (up to 11 weeks according to the IRS website). For responsible parties that are eligible for an ITIN, this timeline could substantially disrupt efforts to set up bank accounts in the United States. In all cases, advance planning may be required for foreign companies wanting to set up a subsidiary in the U.S or open a bank account in the U.S.