Key Takeaways

  • LLCs treated as sole proprietorships or partnerships typically must receive a 1099 if paid $600+ for services.
  • LLCs taxed as corporations generally do not receive 1099s, except for specific services like legal or medical.
  • The tax classification of the LLC (disregarded entity, partnership, or corporation) dictates 1099 requirements.
  • Businesses should always collect Form W-9 to determine an LLC’s tax status before issuing payments.
  • Filing a 1099 when not required won’t result in penalties, but failing to file when required will.

If you're wondering “Do LLCs get 1099s?” the answer depends on the type of business structure. In general, sole proprietorships may need to file these, but corporations do not. However, there are exceptions, so understanding the laws pertaining to taxes can help make sure you follow some very important rules.

About Form 1099

The IRS form 1099 details money or other benefits paid to any of the following:

  • Independent contractor.
  • Subcontractor.
  • Individual or business that's provided services to the company or is owed money by the company.

The form is classified as an “information return.” Payees use the form to calculate taxable income, while issuers use it to document expenses and costs for the IRS.

Business owners have to file form 1099 as a record of payments they made to independent contractors over the course of the tax year. If a business buys or rents products or services that amount to more than $600 from one person or LLC during the year, it has to file a 1099 for that contractor or vendor.

Business owners only have to report payments for services or rent that were earned for business purposes; they don't have to report payments that were made for personal reasons.

The 1099 is similar to a W-2 for employee wages. The IRS has proof of income that can be confirmed on the individual's tax return.

Sole Proprietorships and Partnerships

If an LLC operates as a sole proprietorship, it has to file a 1099 with specific information required by the IRS. Required information includes the following:

  • Sole proprietor's name.
  • LLC's name.
  • Proprietor's social security number, which may act as a tax identification number.

For LLCs that operate as partnerships, the 1099 has to include the business name along with the Employer Identification Number, or EIN.

How LLC Partnerships Are Classified for 1099 Purposes

Whether an LLC partnership receives a 1099 depends on its tax classification. The IRS does not recognize LLCs as a tax entity on their own—they are treated based on their election: disregarded entity, partnership, or corporation.

If the LLC is classified as a partnership, it is generally subject to the same 1099 reporting requirements as individual contractors or sole proprietors. That means businesses paying $600 or more to an LLC partnership in a tax year must issue a Form 1099-NEC, unless the payment falls under an exemption.

To ensure compliance, businesses should request a completed Form W-9 from the vendor, which includes the LLC's federal tax classification. The W-9 helps determine whether the LLC is treated as a partnership and thus subject to reporting.

When Do Business Owners File a 1099 for Contractors?

A 1099 form is typically intended for individuals to file when they provide services or goods to a company. Sole proprietors may not operate as a business entity, but the company might still file the 1099 for them. In this case, the contractor is filing as an individual without a business structure.

It can be more complicated when a contractor does business as an LLC, however. Unfortunately, there's no cut-and-dried answer to the question “Do LLCs get 1099s?” because not every LLC gets the same tax treatment.

If a contractor files taxes as a single-member LLC, he or she is a “disregarded entity,” meaning all income goes through the individual's tax return. In this case, a manager or member of a company can file a 1099 for that person since, for tax purposes, the LLC is treated as a “person.” 

For contractors that operate and file taxes as corporations — such as a C-corp. or S-corp. — for tax purposes, they're treated as corporations, so in general, they don't get a 1099.

Exceptions to the 1099 Filing Requirement for LLCs

There are several exceptions to issuing a 1099 to LLCs, particularly if the entity is taxed as a corporation. The following services are exempt from 1099-NEC reporting:

  • Payments for merchandise, telephone, freight, storage, or similar items.
  • Payments made to corporations (including LLCs taxed as C or S corporations), except in certain cases.

However, businesses must file a 1099 for the following services—even if paid to a corporation or LLC taxed as a corporation:

  • Legal services (attorney fees)
  • Medical and healthcare payments
  • Payments to tax-exempt organizations under specific reporting thresholds
  • Fish purchases for cash

These exceptions underscore the importance of confirming the contractor’s classification on Form W-9 and the nature of the payment before deciding on filing obligations.

What if You File a 1099 for an LLC that Doesn't Require One?

Contractors may sometimes check the incorrect box on their W-9 or fail to file in time. If your company isn't sure if a contractor should receive a 1099, it's usually better to err on the side of caution and file a 1099. You won't be penalized if you file an “extra” 1099 for a contractor who doesn't require it.

However, if you fail to file 1099s for contractors who were supposed to receive them, you run the risk of being penalized by the IRS, to the tune of $100 for every 1099 that wasn't filed. 

You should always try to make sure any contractors your company uses are clear about their tax status. You should keep their W-9s with your business records. Even if you don't have to file a 1099 for a contractor who didn't require it, your company remains covered either way, so you can avoid costly penalties.

Tax law can be complicated, and some questions don't have easy or clear answers. When it comes to business structures, it can be especially complex. To avoid expensive penalties and fines, however, it's usually best to do more than necessary instead of less. You can get more information at the IRS site if needed.

Best Practices to Determine If a 1099 Is Required

To determine whether a 1099 is required for an LLC partnership or any other vendor, follow these best practices:

  1. Request a Form W-9 before payment to collect their legal name, tax ID, and federal tax classification.
  2. Review the nature of the service provided. If it’s for legal, medical, or general service-based work, a 1099 may be necessary.
  3. Track cumulative payments throughout the year. A 1099 is required only if payments total $600 or more annually.
  4. Check tax classification. LLCs filing as corporations are generally exempt from 1099 reporting unless exceptions apply.
  5. Consult IRS instructions for Form 1099-NEC for the most updated rules and exceptions.

Erring on the side of caution and keeping clear documentation can help prevent IRS penalties. Businesses should keep W-9s on file and issue 1099s promptly each January.

Frequently Asked Questions

  1. What happens if I send a 1099 to an LLC taxed as a corporation?
    There’s no penalty for sending a 1099 to an entity that doesn’t require it. The IRS simply disregards it.
  2. Do all LLCs get 1099s?
    No. LLCs taxed as sole proprietorships or partnerships typically do, but those taxed as C or S corporations usually do not—unless they provide legal or medical services.
  3. Is it mandatory to issue a 1099 to an LLC for rent payments?
    Yes, if the LLC is not taxed as a corporation and payments total $600 or more annually.
  4. How do I know an LLC’s tax classification?
    You should verify the classification using the contractor’s completed Form W-9, which discloses whether they’re taxed as a sole proprietor, partnership, or corporation.
  5. When is the deadline to file Form 1099-NEC?
    Form 1099-NEC must be filed with the IRS and sent to recipients by January 31 of each year.

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