When establishing a business in the United States, one crucial requirement is designating a “Responsible Party” as recognized by the Internal Revenue Service (IRS). This individual plays a vital role in the management and oversight of the company’s finances and compliance. Below, we explore the responsibilities and implications of this role.
Definition and Responsibilities of a Responsible Party
The IRS defines the “Responsible Party” as the individual who controls, manages, or directs the company’s financial resources and assets. This person has the authority to make critical decisions regarding the disposition of the company’s funds and assets. However, mere ownership or financial investment in the company does not automatically qualify an individual as the Responsible Party.
The designated Responsible Party must ensure that the company adheres to all applicable tax laws and regulations. Proper identification of this individual in tax filings is essential to avoid legal complications or penalties. Each company must designate only one Responsible Party, and any changes in this designation must be reported to the IRS within 60 days using Form 8822-B.
Implications for Non-Residents Without an ITIN or SSN
If the designated Responsible Party does not possess a U.S. Individual Taxpayer Identification Number (ITIN) or Social Security Number (SSN), the IRS recognizes this individual as a foreign Responsible Party. This designation must be clearly indicated when applying for an Employer Identification Number (EIN).
Procedure for Changing the Responsible Party
In situations where the designated Responsible Party no longer has control over the company, it is mandatory to inform the IRS of the change. This requires the completion and submission of Form 8822-B within 60 days to update the IRS on the new Responsible Party.
Simplifying the Process with Expert Assistance
Navigating the complexities of designating and updating a Responsible Party can be challenging, particularly for foreign entrepreneurs. Export Manager offers a comprehensive business formation plan designed to simplify this process. With our services, you can:
- Form an LLC or Corporation in the U.S. Online: Our streamlined process allows you to establish your business without the hassle of extensive paperwork.
- Open an American Business Bank Account: We facilitate the setup of a U.S. bank account, essential for managing your company’s finances.
- Registered Agent Service: Enjoy the convenience of a Registered Agent for one year, ensuring that your business complies with all legal requirements.
- Virtual U.S. Address: Establish a professional presence in the U.S. with a virtual address for your company.
With Export Manager, you can focus on growing your business while we handle the complexities of U.S. business formation and compliance.