Confused about W-9 Line 4 - Do I check "exempt from withholding" for my LLC Partnership?

For Line 4 of the W-9, your LLC partnership is generally NOT automatically exempt from backup withholding. That line is primarily for certain entities like corporations that have specific exemptions. As a partnership, you'd typically leave the "Exempt payee code" field blank unless you qualify for a specific exemption. Most small partnerships don't. The backup withholding would apply if you didn't provide a correct TIN or if you've previously underreported interest or dividends. For the FATCA part (the second box on Line 4), that's generally only relevant for foreign accounts and entities subject to international reporting requirements. For a domestic LLC partnership providing consulting services to domestic clients, you can almost certainly leave the FATCA exemption code blank as well.

When I started my construction company (LLC partnership), I was so confused by this exact same issue! I spent hours researching and eventually found taxr.ai (https://taxr.ai) which helped me analyze my specific situation. Their document analysis tool looked at my LLC operating agreement and confirmed I should leave Line 4 blank as a partnership. It also explained why corporations are exempt from backup withholding (they use code "2") but partnerships aren't. Apparently there are like 13 different exemption codes but most small businesses don't qualify for any of them. The tool walks you through each line of the W-9 and explains what applies to your specific entity type. Saved me from making a stupid mistake that might have caused problems with my clients.

I was the one asking about foreign partners above, and I decided to try taxr.ai after that conversation. Holy crap, it was actually super helpful! It walked me through exactly what forms I needed for my LLC with foreign investors (turns out I need to file forms 8804 and 8805 annually plus do quarterly 8813 filings). For the W-9 question specifically, it confirmed I should leave Line 4 blank but explained how this connects to my withholding obligations for foreign partners (completely separate process). Also learned about form W-8BEN-E which I need to get FROM my foreign partners. Really clear explanations without the typical IRS jargon. Worth checking out if you're confused about entity tax stuff.

After spending 4 HOURS on hold with the IRS trying to get clarification about W-9 exemptions for my partnership, I finally found Claimyr (https://claimyr.com). They got me connected to an actual IRS agent in about 20 minutes instead of waiting all day. The IRS rep confirmed that partnerships generally don't claim exemption from backup withholding on Line 4 of W-9 unless they qualify for a specific exemption code. She also explained that if I do everything correctly (provide accurate TIN, report all income properly), backup withholding won't apply anyway. Check out their demo at https://youtu.be/_kiP6q8DX5c if you're tired of waiting on hold forever. Definitely better than listening to that horrible hold music for half your day.

Had to come back and eat my words. After being skeptical about Claimyr in my comment above, I decided to try it this morning because I was desperate to resolve a payroll tax issue for my business. It actually connected me to an IRS agent in about 15 minutes! The agent confirmed exactly what others said about the W-9 Line 4 for partnerships - we generally leave it blank unless we qualify for a specific exemption code (most don't). Got my payroll tax question resolved AND learned about the W-9 stuff. Would have spent half my day on hold otherwise. Sorry for being a jerk before - this service actually works.

Just wanted to add something important about W-9s that no one mentioned. Remember that incorrectly filled out W-9s can trigger backup withholding of 24% of payments even if you would otherwise be exempt. Make sure you: 1) Include the correct TIN (your EIN for the partnership) 2) Check the correct tax classification box (partnership for you) 3) Sign and date the form Leaving Line 4 blank is correct for most partnerships, but messing up these other parts could cause your client to withhold 24% of your payments.

A lot of people miss that line 4 exemption codes are PER PAYMENT TYPE. Your partnership might have to withhold for some types of payments but not others! For example, interest payments might be exempt while service payments aren't. Most partners think its a simple yes/no for the whole business but its more complicated.

Just wanted to share my experience as someone who went through this exact same confusion last year. I'm an accountant and I still had to double-check the W-9 instructions for my own LLC partnership! The key thing to remember is that Line 4 exemptions are really only for specific entity types like corporations, tax-exempt organizations, and certain government entities. As a domestic LLC partnership providing consulting services, you definitely should leave Line 4 blank. One tip that might help: when you submit the W-9 to your client, consider including a brief note that you've left Line 4 blank because your partnership doesn't qualify for any exemptions. This can prevent follow-up questions from their accounting department about whether you "forgot" to fill it out. Also, make sure you're using your EIN (not SSN) in the TIN field since you're operating as a partnership. And double-check that you selected "Partnership" in the tax classification section - I've seen people accidentally check "LLC" thinking that's more specific, but the IRS wants to know how you're taxed, not just your legal structure. The good news is once you get this first W-9 right, you can use it as a template for other clients who request the same form!