Who is a Nominee Director?
A Nominee Director is an individual who acts as a company’s director for the purpose of fulfilling the legal requirement to have a director and perhaps to protect the identities of the persons actually controlling the company. A Nominee Director is intended to facilitate the beneficial owner in matters of privacy. In certain jurisdictions there is a requirement to identify on the public record the details of the entity’s directors. In such cases the benefits of anonymity can only be achieved through the use of third party professional director. By using a “Nominee” the names of the entity’s beneficial owners are neither on the record nor disclosed to any third party.
Who can appoint the Nominee Director?
New and existing entities can appoint a Nominee Director.
- For a new entity, there will be an agreement between the owner of the Company and the Nominee Director (or) the company which is rendering the Nominee service. The Agreement will also contain the responsibilities and the liabilities of the nominee director.
- For an existing entity, the nominee director will be appointed only after the approval by the Board of Directors. An agreement will then be signed by the entity and Nominee service provider, Nominee Director on its Board. The tenure of the nominee director will be fixed at the time of appointment.
The nominee director so appointed will not have any voting rights in the meetings held by the entity.
Why could someone need a Nominee service for the Business needs?
There are two reasons for going for this service, they are:
- An individual who does not want to disclose their identity as an owner of an organization.
- Individuals who does not have SSN (Social Security Number) and want an EIN, as it is mandatory to use SSN in the application.
Nominee Services For “Obtaining Ein” & “Nominee Director”
In today’s busy world, most of us would like to simplify our lives. One easy way to do this is by using the Nominee services for the new or existing business. The most popular nominee services in USA are “Nominee service only to obtain EIN” & “Nominee service only as nominee director with authority to write checks or sign documents.”
Nominee Service for obtaining EIN:
Nominee service EIN is designed only for the purpose obtaining the Federal Tax ID number with an agreement between the two parties. The Nominee’s SSN will be used on the application to obtain EIN and once EIN is received, the nominee will resign and the beneficiary/owner will take over the entity.
Nominee service EIN is provided to Corporation, LLC, Partnership and sole-proprietors who plan to have employees. This service is not available for LLC’s or S-Corporations which are taxed as partnerships or as an individual.
What is EIN?
EIN (Employer Identification Number) is also known as Tax ID (Tax Identification Number) which is issued by IRS. The EIN is a nine digit number (in xx-xxxxxxx format) which constitutes, to some extent, the social security number of the company.
EIN has to be applied usually after a new business is started. Any individual needs an EIN for starting a new business like Corporation, LLC, Partnership or plan to have employees. EIN is also required for opening a bank account for the company.
Nominee director with authority to write checks or sign documents:
Some corporations may need nominee directors for signing their checks or tax returns since they may be international owners / founders. This provides them the flexibility of operating their business irrespective of their geographical location in the globe. Nominee Directors with authority to write checks, etc do need to enter in a special agreement with the owners to waive the liability arising out of signing.
Responsibilities and Liabilities of a Nominee Director:
- Such directors are in name only and have no other responsibilities and powers.
- Nominee Director(s) are not responsible for and will not make any decisions whatsoever in connection with the management of the entity.
- Nominee Director(s) will neither be identified, nor can sign entity documents nor can sign returns on behalf of the entity.
- The beneficial owner is fully responsible for financial, legal and in all other aspects for the operation of the entity.
- The nominee will not have any liabilities as he will neither be signing any contract on behalf of the entity nor signing up for obtaining a Bank Account.
- The Nominee Director cannot and will not enter into any business contract or financial or moral commitment.
ICS, Inc (www.mybizfiler.com) offers a wide range of services typically offered by a Big 5 Accounting firm and a CPA firm in the U.S. ICS offers Incorporation, Book Keeping, Payroll Services, HR & Business Consulting etc. Contact ICS today at 203 437 4083 , e-mail – firstname.lastname@example.org, or by accessing 24/7 chat page on www.mybizfiler.com.
The contents of this post are personal statements or opinions expressed by Priyanka Kosigi, Manager of ICS, Inc. who has written the article and by Padmaja Nallamotu, Manager of IBSN Global Inc. who has assisted and supported the article. They must not be construed as financial, investment or taxation advice.