A hallmark of the U.S. legal system is that it does everything it can to protect the right of those who cannot make their own decision. At the same time, it also seeks to protect the rights of the people from an individual, company or entity that won’t or can’t comply with the law. Hence, there are receiverships.
So What is a Receivership?
This legal arrangement occurs when a company or institution is held by a receiver, who is put in control of the property or assets of that other entity. This usually happens when the company or organization can no longer meet its financial responsibilities, or has even declared bankruptcy. A court will also appoint a receiver in the event that a company or an organization refuses to or is unable to follow its constitutional obligations to protect the basic human rights of those people on whom they depend. In either case, the receiver can get an EIN online or check the status of the EIN when setting up the entity.
The Two Types of Receivership
There are basically two types of receivership. One is caused by the financial inability of an entity to continue to pay its bills or provide the services it is charged to do. This is often caused by bankruptcy. The second type occurs when a receiver is appointed to manage a property or asset on behalf of someone who no longer can do so. This is typically a result of failing mental health. However, it can also be enforced by a court to seize control of an entity that will not follow regulatory laws that apply to it.
In the end, the U.S. legal system attempts to protect individuals who cannot protect themselves, whether they are the cause or victim of the non-compliance of a law.
Whose TIN Does a Receiver Use on an Application?
If you have been appointed as a receiver for an entity that is required to report taxes – including a partnership, corporation, limited liability company or limited liability partnership – or you have been appointed as a receiver for any assets belonging to any such entity, you should use the entity’s TIN.
It should be easy to identify an existing TIN that the entity might have previously obtained. This number can be found on tax returns or other types of business documents. If the entity needs a new TIN, it will be necessary for you or a representative of the entity to fill out and submit IRS Form SS-4 (Application for Employer Identification Number). Then, you can use the new tax identification number for reporting taxes for the entity you are a receiver for.
Never use your own social security number or tax identification number in actions associated with the entity you are a receiver for.
Why Might an Entity Need a New Tax ID Number?
The entity you are a receiver for might need a new EIN to open a bank account, which you will be in charge of doing. A bank account may be necessary to pay rent and expenses, and receive payments.
Filling Out the EIN
As a receiver, you will want to be certain that you fill out the top line of the application with the name of the receivership, not the name of the receiver. While you will need to put your name on the application indicating you are the receiver, this is only to specify that you are the conduit, not the taxpayer entity.
For help filling out an EIN application as a receiver, contact us and we will let you know what you need to make the process as simple as possible.