1099 Forms and LLC Taxation
A single-member LLC or partnership will get a 1099 form from a company paying $600 or more in yearly revenue. If an LLC is taxed as an S corporation, it will not receive a form 1099. If an LLC is taxed as a disregarded entity, a 1099 is required. This document must include the sole proprietor’s name and Social Security number as well as the name of his or her LLC.
Reporting Requirements for LLCs
Single-member LLCs will need to report their earnings on Form Schedule C on their individual tax return. Whether or not you do depends on how your LLC is taxed.
When a single-member LLC is taxed as a Sole Proprietorship or a multi-member LLC is taxed as a Partnership, any business that pays the LLC $600 or more for services in the year must send it a 1099-NEC form. If a business has sold $5,000 or more of consumer products to an LLC for resale, it may send Form 1099-NEC or 1099-MISC.
Understanding When LLCs Receive 1099s
An LLC provides a great deal of legal protection to the owner(s) of the LLC. There are three main reasons a business owner might choose an LLC over other business structures:
- They are fairly easy to form and maintain with fewer restrictions than other business structures like C corporations.
- Protects business owners from being personally liable for the company’s debts or other liabilities.
You cannot issue a 1099 to yourself from your own LLC. If you hire yourself as a contractor to perform work for your LLC, then the LLC would issue you a 1099-MISC. Being taxed as an S corporation may not be the best option if distributions after paying salary are less than $10,000.
Sole Proprietorships and the 1099
Sole proprietors don’t need to fill out form 1099 unless they hire contractors or subcontractors. They use this form to report their earnings. If the LLC is taxed as a partnership or single-member LLC, the contractor needs to receive a 1099 form.
An independent contractor can be any business entity, but most are sole proprietors. You use Form W-2 to report wages, allowances, and compensation for employees.
For single-member LLC or partnership, you will get a 1099 from a company paying $600 or more yearly. If you are paying an LLC taxed as a disregarded entity, a 1099 is required with the sole proprietor’s information.