What is the Difference Between a "Responsible Party" and a "Nominee"?

Question: What is the Difference Between a "Responsible Party" and a "Nominee"?

Item 3 on IRS Form SS-4, the application for an Employer ID Number (EIN), has recently been changed to distinguish between a "nominee" and a "responsible party." The IRS wants to be sure that only the responsible party is listed, so they know they are communicating with the person responsible for the company. The application should not be signed by a nominee; only a responsible party may sign.

Answer:

The IRS says:
A “nominee” is someone who is given limited authority to act on behalf of an entity, usually for a limited period of time, and usually during the formation of the entity.

On the other hand, the "responsible partyfor the business is the “principal officer, general partner, grantor, owner, or trustor." The “responsible party” is the individual or entity that controls, manages, or directs the entity and the disposition of the entity’s funds and assets, unlike a nominee, who is given little or no authority over the entity’s assets.

What if there are multiple responsible parties?
In the case of a partnership, for example, there may be multiple partners who could qualify as the responsible party. In this case, you may select the person you want the IRS to recognize and contact as the responsible party.