Do LLCs Get a 1099? Rules for Receiving and Issuing
Learn how LLCs interact with 1099 forms. Understand your obligations for receiving and issuing, and the role of tax classification in reporting.
A Limited Liability Company (LLC) offers a flexible business structure, combining the liability protection of a corporation with the tax efficiencies often associated with a partnership or sole proprietorship. Businesses interact with various entities, including other LLCs, raising questions about income reporting. Form 1099 is a crucial document used by the Internal Revenue Service (IRS) to track payments made to independent contractors, vendors, and other non-employees. Understanding when an LLC receives or issues these forms is essential for tax compliance and accurate financial record-keeping.
When an LLC Receives a Form 1099
An LLC, like other business structures, may receive a Form 1099 when it is paid for services or certain other types of income. Businesses that pay an LLC for services must issue a Form 1099-NEC (Nonemployee Compensation) if the total payments reach $600 or more in a calendar year. This applies to services like professional fees, commissions, and payments for parts and materials. The payer is responsible for issuing this form to the LLC, which then uses it to accurately report its income.
Beyond nonemployee compensation, an LLC might receive other types of 1099 forms. For instance, if an LLC receives $600 or more in rents, prizes, or awards, the payer would issue a Form 1099-MISC (Miscellaneous Information). Royalties of $10 or more also trigger a 1099-MISC. This ensures various income streams are reported to the IRS for proper tax assessment.
When an LLC Issues a Form 1099
An LLC often acts as a payer, engaging independent contractors and other vendors for services. In such cases, the LLC is required to issue a Form 1099-NEC to any non-employee it paid $600 or more for services in its trade or business during the year. This obligation applies to payments made to individuals, partnerships, and estates, ensuring that compensation for services is properly reported. The current reporting threshold for Form 1099-NEC is $600, but this amount is set to increase to $2,000 for tax year 2026, with subsequent annual adjustments for inflation.
An exception to 1099 reporting rules applies to payments made to attorneys. An LLC must issue a Form 1099-NEC for attorneys’ fees of $600 or more, regardless of whether the attorney operates as an individual, partnership, LLC, or a corporation. Additionally, if an LLC pays $600 or more in rents, royalties, or medical and healthcare payments, it must issue a Form 1099-MISC.
How LLC Tax Classification Influences Form 1099 Reporting
The tax classification of an LLC significantly impacts its 1099 reporting requirements, both for receiving and issuing these forms. Payments made to corporations are exempt from 1099 reporting. However, specific exceptions exist, such as payments for legal services or medical and healthcare payments, which must be reported regardless of the recipient’s corporate status.
When an LLC is treated as a disregarded entity (like a single-member LLC) or a partnership for tax purposes, it is subject to receiving 1099 forms for services, similar to an individual. Conversely, if an LLC has elected to be taxed as an S corporation or C corporation, it will not receive a Form 1099 for services, as payments to it are exempt from reporting by the payer. This distinction means payers need to confirm an LLC’s tax status. Payments made internally within an LLC, such as distributions to its members, are not reported on Form 1099, differentiating them from payments to external contractors.
Preparing to Issue Form 1099
To ensure compliance when issuing Form 1099, an LLC must take specific preparatory steps. Collect a completed Form W-9, “Request for Taxpayer Identification Number and Certification,” from all independent contractors and service providers before making payments. This form provides information, including the payee’s correct taxpayer identification number (TIN)—which could be a Social Security Number (SSN) or Employer Identification Number (EIN)—their name, address, and business entity type. Obtaining a W-9 helps the LLC determine if a 1099 is required and ensures the accuracy of the information reported to the IRS.
Accurate record-keeping of all payments made to contractors and vendors throughout the year is also important. This tracking allows the LLC to identify when the $600 payment threshold (or the $2,000 threshold starting in 2026) has been met, triggering the need for a Form 1099. The deadline for furnishing Form 1099-NEC to recipients and filing it with the IRS is January 31 of the year following the payment. For Form 1099-MISC, the recipient copy is due by January 31, while the filing deadline with the IRS is February 28 for paper filing or March 31 for electronic filing.