Overview of LLCs and 1099 Requirements
If the contractor checks the box marked "Individual/Sole proprietor or single-member LLC," then the company is a disregarded entity, and you must send it a 1099-MISC. The structure of a business entity defines whether it should be issued a 1099. An LLC can opt to be treated as either a sole proprietorship (disregarded entity), partnership, or corporation by the IRS for tax purposes. A disregarded entity refers to a business entity with one owner that is not recognized for tax purposes as an entity separate from its owner.
LLCs and 1099 Filing
As a disregarded entity, a single-owner LLC should receive a 1099-MISC form for business services they perform—unless it has chosen a different filing status. You will need to send out a 1099-NEC form if you’re working with an LLC sole proprietorship. If you pay an LLC more than $600 a year for its services, you must issue a 1099 Form to the LLC and file it with the IRS.
Completing and Submitting Form 1099
You must complete and submit Form 1099-MISC to all applicable businesses by January 31 of the following year. For example, if you paid Company A, LLC $6,000 for services rendered in 2012, you must submit a 1099 to Company A by January 31, 2013.
Common Questions about 1099s for Businesses
You must send 1099 forms whether you engaged in the transaction with a limited liability company, limited liability partnership, partnership, or sole proprietor. While 1099s are issued to workers and sole proprietors, LLCs can get one as well in some situations.
Understanding 1099-NEC for LLCs
Before delving into the intricacies of Form 1099 filing requirements for LLCs, let’s briefly revisit what an LLC is all about. Individuals can’t become commercial entities or instruments of the state according to the regulations. If your LLC is taxed as an S corporation, it will not receive a form 1099.
Corporations and 1099 Exceptions
Corporations are a major exception to the 1099 requirement. Most payments to incorporated businesses do not require you to issue a 1099 form.