An email just went out to everyone who applied that the advance is based on $1000/employee and I assume that sole proprietors/ single-member LLCs would be considered one employee. 

Lastly, since you mentioned one of the borrowers is an LLC, you should note the following exception to the 1098 form: "You need not file Form 1098 for interest received from a corporation, partnership, trust, estate, association, or company (other than a sole proprietor) even if an individual is a coborrower and all the trustees, beneficiaries, partners, members, or shareholders of the payer of record are individuals."

In regards to having a business he can be a sole proprietor and file under his social security number on the W-9 (In MO) without a legal entity however you need prove that he has a legitimate business.

We have a rental and a sole proprietor biz.

When hiring a roofer, if the guy tells me that he is a sole proprietor, or that there are 3 co-owners of the company, or that he hires another sole-proprietor of a company and he just signs a waiver with the city before he starts work that I (as a homeowner) will not be responsible if he injures himself...therefore he doesnt need to have workers comp.Is this true?

- ‘lifestyle’ business – ie simply intended to be run by and to provide an ongoing source of work and income for the proprietors, no clear vision for the long term future?

Here are some information on LLC taxation: If an LLC has only one owner, the IRS will automatically treat the LLC as a Sole Proprietor(disregarded entity); and if an LLC has multiple owners the IRS will automatically treat it as a Partnership.

@Andrew Wong  Interesting you say that because I am a sole proprietor.  

@Antoaneta Ortiz,An LLC is treated for federal income tax purposes as a corporation, a partnership, or as a sole proprietor. 

@Joe SplitrockYou will still have to personally guarantee the loan while buying through an LLC, unless it's longstanding and credit worthy on its own, but the risk of operating sole proprietor is beyond any risk I'm willing to take.