A lot of Pakistani founders form a U.S. LLC, get their EIN, and feel like the setup is done. The company exists. The tax ID is in hand. Everything looks official.
Then tax season arrives – or Stripe asks for personal verification – and things get complicated in ways nobody warned them about.
An EIN gets your business registered with the IRS. It does not cover you. For a non-resident founder, that distinction matters far more than most setup guides acknowledge.
The Role of an EIN vs. ITIN in Your U.S. Business
Before getting into what goes wrong, it helps to understand what each number actually does. They solve different problems. Treating them as interchangeable is where most of the confusion starts.
EIN: The Identity of Your Business Entity
An EIN – Employer Identification Number – is essentially a Social Security Number for your company. The IRS uses it to track the business: its filings, its transactions, its tax status.
Getting one is straightforward. You apply by fax or mail, no U.S. presence required. Most founders have one within a few weeks of forming their LLC. It’s what lets you open a business bank account, file a business tax return, and get set up with payment processors at the entity level.
The EIN belongs to the LLC. Not to you.
ITIN: Your Personal Identity in the U.S. Tax System
An ITIN – Individual Taxpayer Identification Number – is a completely different number. The IRS issues it to individuals who have U.S. tax obligations but aren’t eligible for a Social Security Number. That includes most non-resident foreign nationals running U.S. companies.
If an EIN answers “Who is this business?”, an ITIN answers “Who is this person?”
Getting an ITIN is not as simple as getting an EIN. It requires certified passport documentation, a completed W-7 form, and in most cases a reason for needing it – like an attached tax return. It’s a proper identity verification process, and the IRS takes it seriously. You can read more about what that process looks like on our ITIN Service page.
Scenarios Where an EIN Alone Fails Pakistani Founders
There are specific situations where having only an EIN leaves you in a compliance gap – and each one has real consequences.
Single-Member LLC Profit Reporting (Form 1040-NR)
A single-member LLC is a “disregarded entity” under U.S. tax law. The IRS doesn’t treat it as a separate taxpayer. It looks straight through the company to the owner.
What that means in practice: any profit the LLC earns is treated as your personal income, not the company’s. The business may file an information return using its EIN, but you – the individual – are required to report that income on Form 1040-NR, the personal tax return for non-resident aliens.
You cannot file Form 1040-NR without an ITIN. The form requires one. If your LLC turned a profit and you don’t have an ITIN, you have an unmet personal tax filing obligation – not a business one. Most founders don’t realize this until it’s already a problem.
Claiming Tax Treaty Benefits to Reduce U.S. Withholding
The U.S. and Pakistan have a tax treaty. Under it, certain types of income – like royalties – may be taxed at a reduced rate or not taxed in the U.S. at all. That’s genuinely useful for founders receiving payments that would otherwise face automatic withholding.
Without a treaty claim in place, the default IRS withholding rate on certain passive income is 30%. That’s not a penalty – it’s just the standard rate applied when no exemption has been formally claimed. Filing a valid treaty claim is how you stop that withholding from applying.
To claim any treaty benefit, you have to identify yourself to the IRS as an individual taxpayer. Treaty claims go on individual tax forms, and those forms require an ITIN. Without one, the benefits stay on paper. Our EIN vs. ITIN Guide covers the comparison in more detail.
Identity Verification for Payment Processors (Stripe/PayPal)
This one catches founders off guard more than any other.
Stripe and PayPal operate under KYC – Know Your Customer – requirements. When they onboard a business, they use the EIN. That part usually goes fine. The issue comes later, when they trigger a review of the individual account holder. At that point, they’re not asking about the business. They’re asking about you.
A common pattern: Stripe accepts the initial setup using an EIN but then requests personal identity verification once the account hits a certain transaction volume. For non-resident owners, the expected identifier at that stage is an ITIN. Without one, payouts can be held while the verification request sits open.
This isn’t some platform quirk. It reflects the same logic the IRS applies – the business and the person behind it are two separate identities, and both need to be accounted for.
Common Founder Misconceptions
Two misconceptions come up repeatedly with Pakistani founders. Both are understandable. Both cause real problems if left uncorrected.
Does an EIN Cover All My Taxes?
No. An EIN handles the business-level relationship with the IRS – things like your LLC’s information return and employer-side payroll filings if you have employees.
Your personal tax obligations are separate. If your LLC generates income that flows to you as the owner, you have a personal filing requirement. Personal returns require a personal tax ID – the ITIN, not the EIN. The two don’t substitute for each other.
Is an ITIN Only for Employees or People Living in the U.S.?
This is one of the more persistent myths. A lot of content online frames ITINs as something for people physically present in the U.S. or working as employees. That’s not accurate.
The IRS issues ITINs to any non-resident who has a U.S. tax obligation – regardless of where they live. If you’re sitting in Karachi running a U.S. LLC that earns money from U.S. clients, you have a filing requirement. Your location doesn’t change that. The same applies to Pakistani founders claiming treaty benefits on passive income. Non-resident. Tax obligation. ITIN required.
When and How to Apply
Timing matters as much as understanding the need. Getting an ITIN at the wrong stage creates friction – and in some cases, missed deadlines.
The Timeline: EIN for Formation, ITIN for Tax Season
The practical order is straightforward. You get an EIN when you form the company – it’s needed for your bank account and initial platform setups. That happens immediately after formation.
The ITIN comes later, typically tied to your first tax filing season or when a platform like Stripe requests personal verification. The IRS currently takes roughly three to four months to process an ITIN application from a Pakistani resident. If you wait until a deadline is approaching – or until a payment processor has already flagged your account – you’re already behind.
Start the ITIN process well before your first Form 1040-NR is due. Founders who handle this without stress are the ones who started early in their first operating year, not at the end of it.
Documentation Needs: Passport vs. SS-4
Getting an EIN requires Form SS-4 – a business registration form submitted by fax or mail. No personal identity documents required. The IRS processes it and sends back an EIN.
Getting an ITIN is a different process entirely. It requires Form W-7 plus a certified copy of your passport. The word “certified” matters here. The IRS requires the certification to come from an approved source: either a Certifying Acceptance Agent (CAA) or the issuing government authority.
A common mistake among Pakistani founders is using a local notary to certify the passport copy. Pakistani notaries are generally not recognized by the IRS for this purpose, and applications submitted with improperly certified documents get rejected. The process then starts over, adding months to an already slow timeline.
Working through a proper CAA – or a service that works with one – is not just a convenience. For Pakistani applicants specifically, it’s often the difference between an approved application and a rejected one. Our ITIN Service page explains how we handle the certification and submission process for founders applying from Pakistan.
Frequently Asked Questions
Do I need an ITIN if I already have an EIN?
Yes, if you have personal U.S. tax obligations or need to claim tax treaty benefits. The EIN only covers the business. If the LLC generates profit that flows to you as the owner, you have a personal filing requirement – and the EIN can’t satisfy that.
Can I file a personal U.S. tax return with just an EIN?
No. Form 1040-NR – the personal return for non-resident aliens – requires an ITIN. There’s no way to submit it using an EIN in place of a personal tax ID
How does the U.S.-Pakistan tax treaty affect my need for an ITIN?
The treaty may reduce withholding on certain income types like royalties – a real benefit for Pakistani founders. But claiming those benefits on IRS forms requires identifying yourself as an individual taxpayer. That requires an ITIN. Without one, the treaty benefits stay unclaimed even if you’re fully entitled to them.
For founders who’ve already formed their LLC and have an EIN in hand, the next step is checking whether your personal compliance picture is complete. Our EIN Guide explains what the EIN covers, and our EIN vs. ITIN Guide breaks down exactly where each one applies to your situation as a Pakistani or NRP founder.