Issuing 1099 Forms
If an LLC pays an individual or a partnership $600 or more for services rendered, a 1099-MISC form must be prepared and provided to the recipient.
- A business owner must file Form 1099-MISC when they pay an unincorporated independent contractor at least $600 in a year for work performed in the course of the business.
- The magic number for issuing a 1099-NEC is $600; it’s required for payments made to non-employees.
- Some payments are exempt from 1099 reporting, including payments for merchandise, telegrams, telephone, freight, storage, and rent to real estate agents acting as an agent for the owner.
LLC Classification and Taxation
Different LLCs are affected by the 1099 filing based on how they’re taxed:
- Single-member LLCs that have not elected to be treated as a corporation generally do not receive 1099 forms since their income is reported on the owner’s personal tax return using Schedule C (Form 1040).
- Multi-member LLCs may have different reporting requirements. If an LLC is taxed as an S corporation, it will not receive a Form 1099.
Tax Forms for Various LLC Types
Here are some cases for issuing and receiving 1099 forms for different types of LLCs:
- Single-member LLCs: Known as "disregarded entities," income is filed under the owner’s personal tax return with Schedule C.
- Multi-member LLCs taxed as Partnerships: The LLC must receive a Form 1099-MISC for payments totaling $600 or more during the year.
- LLCs taxed as S Corporations or C Corporations: Generally, they do not receive a 1099 form.
- If a business has sold $5,000 or more of consumer products to an LLC for resale, a Form 1099-NEC or 1099-MISC may be issued.
Hiring as an LLC Owner
- As an LLC owner, you can hire yourself as an independent contractor and the LLC can issue you a Form 1099-MISC.
- A member’s draw, also known as an owner’s draw, records the amount taken out of a company by one of its owners. Owners do not have to take equal distributions.
- An owner of an LLC cannot issue himself a 1099 as he isn’t an independent contractor or vendor.
Freelancers and Contractors
Freelancers and contractors working for an LLC are not considered employees or representatives of the business.
Tax Filing and Legal Requirements
For income tax filing, it’s important to understand the issuance and reception of 1099 forms. For assistance with tax forms and legal guidance, businesses may seek help from qualified professionals or use services such as UpCounsel.