Do Sole Proprietors and Single-Member LLCs Get 1099s?

A Form 1099 is an information return used by the Internal Revenue Service (IRS) to track income received by individuals and businesses that are not employees. Sole proprietors and single-member Limited Liability Companies (LLCs) are classified as independent contractors for tax purposes. These forms are important for accurate income reporting to the IRS.

When Sole Proprietors and Single-Member LLCs Receive 1099s

Businesses are required to issue Form 1099-NEC, Nonemployee Compensation, to independent contractors, including sole proprietors and single-member LLCs, if they pay $600 or more for services in a calendar year. This requirement applies to payments made in the course of a trade or business.

Single-member LLCs are treated as “disregarded entities” by the IRS for federal income tax purposes, meaning their income and expenses are reported on the owner’s personal tax return, similar to a sole proprietorship. A business paying a single-member LLC for services will issue a 1099-NEC to the owner, using their Social Security Number (SSN) or Employer Identification Number (EIN). If an expected Form 1099-NEC is not received, all income earned must still be reported on the tax return. If a received 1099 contains incorrect information, such as an inaccurate amount or taxpayer identification number, contact the payer to request a corrected form.

Reporting 1099 Income

Income reported on Form 1099-NEC for services performed as a sole proprietor or single-member LLC is reported on Schedule C, Profit or Loss from Business, which is filed with your personal Form 1040. All business income must be reported, even if a 1099 form was not received, as the IRS considers any income earned from self-employment activities as business income.

Reporting income on Schedule C allows for the deduction of eligible business expenses, which reduces net taxable income. These deductions must be for ordinary and necessary expenses directly related to the business activity. In addition to income tax, net earnings from self-employment for sole proprietors and single-member LLC owners are subject to self-employment tax, which covers Social Security and Medicare contributions. For 2024, this tax rate is 15.3% on net earnings, consisting of 12.4% for Social Security and 2.9% for Medicare. If you expect to owe at least $1,000 in taxes for the year, including income tax and self-employment tax, you are required to make estimated tax payments throughout the year, typically made quarterly to the IRS to cover your tax liability as income is earned.

Issuing 1099 Forms to Others

Sole proprietors and single-member LLCs also have obligations as payers of services. If you pay another independent contractor $600 or more for services during the calendar year, you are required to issue them a Form 1099-NEC.

To issue 1099 forms, collect a completed Form W-9 from each independent contractor before making payments. This form provides the necessary taxpayer identification number (TIN) and other information for accurate 1099 reporting. The deadline for sending Form 1099-NEC to recipients and filing it with the IRS is January 31 of the year following the payments. Adhering to these deadlines is important to avoid potential penalties.