The reason that a Single Member LLC (SMLLC) is required to use the SSN of the owner is because of backup withholding. If the legal name and Taxpayer Identification Number (TIN) that the IRS expects to be associated with the reporting do not match their database, a red flag will go up. Think of the W-9 form as a map. The W-9 ties into the 1099-MISC because that is the form that reports amounts paid to an independent contractor. Interest payments are not the same as services performed, and they don't fall under the same category.
SMLLCs are considered disregarded entities separate from their owners, as you know. This is because the IRS expects the taxpayer to carry the income onto his or her personal tax return. For this purpose, it's irrelevant whether the LLC uses its own EIN for banking. Imagine you are going to the airport to catch a flight. It doesn't matter if you are representing your business or if it's a personal vacation- you need to show your driver's license and not your Articles of Organization to get on the plane.
Form W-9 asks for the Name as shown on your tax return on line one, and the Business Name / Disregarded Entity name on line two. Line two makes it clear to the IRS that there is another EIN out there being used in banks, for example. If the disregarded LLC's EIN is used on Form W-9 line one and on Form 1099-MISC, then nothing will happen to you when you file your tax return; however, the IRS could potentially inform the withholding agent that they are required to collect a B Notice from you to correct the information. The next step is backup withholding.
@cparke3
