How to Issue a 1099 to an LLC

Updated: 2/26/24

If you’re preparing your 1099s for the year, you may be wondering how to issue a 1099 to an LLC for tax purposes. To help guide you, this article will show you which types of limited liability companies (LLCs) should be issued 1099s. We’ll also cover the IRS requirements for each.

What is a 1099 form?

The 1099 form is a federal tax document that the Internal Revenue Service (IRS) requires business owners to file yearly. The form is used to report payments made to independent contractors, freelancers, and other non-employees. It contains information such as the payer’s name, address, tax identification number, type of payment, and the amount paid. 

As a business owner, you must often provide a 1099 form to any contractor you have paid $600 or more throughout the year. This helps the IRS ensure independent contractors are properly reporting and paying income tax. If you fail to issue this documentation on time, you may be subject to penalties from the IRS. 

Does an LLC get a 1099?

In most cases, the IRS requires you to report any income paid to a limited liability company on a 1099 form if the amount exceeds $600 in one year, unless the LLC is taxed as a corporation. This income paid includes income from services, rent payments, and other sources. Therefore, if you pay an LLC more than $600 for services, products, or rent (not including rent paid to a real estate agent) within a given tax year, you may be required to send them a 1099. 

The type of 1099 used will be determined by what you paid the LLC for. In most cases, it will be either a 1099-MISC or 1099-NEC. A 1099-MISC should be used if you’re reporting payments that aren’t subject to self-employment tax.

When reporting payments that are subject to self-employment tax, you’ll use a 1099-NEC. NEC stands for non-employee compensation, meaning payments made for services from someone who’s not your employee, such as an independent contractor or freelancer.

Single-Member LLCs

An LLC filing taxes as single-member LLC is categorized as a “disregarded entity.” This term simply means that the tax return for their business is filed with their individual tax return rather than separately. 

That said, you are required to send single-member LLCs a 1099 form. They’ll use this form to report your payments as income when filing their tax return. 

Multi-Member LLCs

By default, LLCs with more than one member are considered partnerships for tax purposes by the IRS. Most models require each partner to file their share of the income on their tax return. This structure means you will need to send them a 1099. 

LLCs Filing as Corporations

Whether it’s a single-member LLC or a multi-member LLC, LLCs also have the option to file taxes as either an S corporation or a C corporation. Some LLCs will file as an S corporation as a way to save on self-employment taxes, while other LLCs may file as C corporations to take advantage of the wider range of tax deductions available. 

In either case, you usually don’t need to issue a 1099 to an LLC filing as a corporation. You can find out whether the LLC is being taxed as a corporation by requesting them to complete a W-9 form.

You must send any 1099 forms that you’re required to send by January 31st of each year. This is applicable regardless of the type of 1099 or business you’re preparing it for. 

How to Issue a 1099 to an LLC

When issuing a 1099 to an LLC, you must understand how the process works to ensure you’re in compliance with the IRS. You must fill out the correct form with all the required information and send it to the LLC. 

There are specific requirements that outline what should be on the form, what type of 1099 you should send, and how you should send them. Understanding these things is essential to avoid penalties from the IRS. 

Step 1: Review IRS Requirements for a 1099

The IRS requirements for a 1099 LLC will vary depending on the type of LLC you’re preparing it for, but each will require your business name and taxpayer identification number (TIN). For example, if you’re preparing the form for a single-member LLC, you’ll need to include the owner’s name, Social Security number, or TIN (if applicable). For partnerships, you will list the business’s name and employer identification number (EIN). Companies with corporation status will not require a 1099, except for special cases.  

When filling out the form, you must place information in the correct place on the form. 

• Any rent payments will be listed in box 1. 
• Payments for prizes, awards, and other income will be listed in box 3. 
• Payments for medical or healthcare payments will be listed in box 6.

If you need additional help with the form, you can find complete instructions on the IRS website. 

Step 2: Get a 1099 Form

You can get a 1099 form by visiting irs.gov/orderforms. You can order the forms and have them delivered electronically or by mail. From here, you can browse a list of all available forms or search for the type of 1099 form you need. 

Each form will have instructions for the payer and recipient. If you need further instructions, consult a qualified accountant. 

Step 3: Send a 1099 Form

After completing the form, you must ensure it’s delivered to the LLC. You can determine where the 1099 should be sent by referring to the W-9 form the LLC completed at the beginning of your arrangement. 

Each 1099 you must send should be delivered to the LLC by January 31st. Penalties for not providing the form on time can range between $30 and $100, depending on how late it is. 

Try ZenBusiness

Preparing for the tax season doesn’t have to be stressful, and thankfully, we can help. Whether you’re just starting your LLC, growing your business, or looking to keep your finances more organized, we offer an inclusive set of products to help keep your business on track. More specifically, ZenBusiness Money can help you manage your income, expenses, and taxes all in one place. 

Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.