Do LLC Get 1099 | Freelance Business Tips
2022 Freelancer Tax Tips | Do LLC Get 1099?
For some contingent workers, you may have an LLC established and it can be confusing to navigate tax regulations. Do LLC get 1099 forms too? The short answer is–yes, generally LLCs for freelancers do receive a 1099 form, just like individuals. However, there are some exceptions, so let's explore this topic in full today.
First, what is a 1099 and what’s the difference between 1099-MISC vs 1099-NEC?
LLCs and Form 1099s | A simple explanation
1099 forms are digital or physical paperwork that you receive as a freelancer if you were paid over $600 in the course of a year. It simply contains information about you (or your LLC) and how much you were paid. If you have an LLC, the 1099 can be addressed to your LLC. For example, under Name you may see “YOUR Company LLC” instead of “YOUR NAME”. Thus, LLCs DO get 1099s.
To avoid confusion, the IRS reintroduced the 1099-NEC in 2020 and it has since replaced the 1099-MISC for freelancer/contractor payments. In short, you should be receiving a 1099-NEC.
| Type | Single-Member LLC | Multi-Member LLC | S, or C Corporation |
|---|---|---|---|
| Should you get a 1099? | Yes, if over $600 | Yes, if over $600 | No |
| Tax Implications | All 1099-NEC forms are summed up and flows through to your personal tax return on Schedule C of Form 1040. | All 1099-NEC forms are summed up and distributed among each member proportional to their ownership, via Schedule K-1 of Form 1065, then flows through to each member’s tax return Form 1040. | Tax implications are complicated and can be split among the Corporation and its owner(s). The exact process will vary. |
| Other Notes | Sometimes referred to as “disregarded entity”, “sole proprietor LLC”. | Sometimes referred to as “Partnership” and also a “disregarded entity”. | Generally not the structure most freelancers establish for their LLCs, until the business is more mature. |
Do LLCs get 1099s?
Understanding LLCs Types | How LLCs are Taxed
Depending on the type of LLC you have, there are different tax implications and that can dictate whether or not your LLC would receive a 1099 form. Generally, most LLCs for freelancers are taxed as “pass-through” entities. This means that any income minus expenses made through the LLC will get “passed” to your personal tax return. We’ll talk briefly about the different types of LLCs and provide some examples:
LLC types-quick and easy guide
Single-Member LLCs
Single-member LLCs are exactly as they sound and typically do receive 1099 forms. It is an LLC with only a single controlling member/officer. This is usually a freelancer that owns his/her practice by themself with no other controlling persons. This doesn’t mean you don’t have contractors or even employees, it just means you are the only officer. Many times, this type of LLC is treated as a “pass-through” entity, which means the income flows through to the individual.
An Example:
You make $100,000 as a single-member LLC, with $50,000 in expenses. That means your net income as $50,000, which “flows through” to your personal tax return
Because you are the only member, the full $50,000 goes to your personal 1040 as “gross income”. Assuming you have no other source of income, you pay taxes on $50,000 minus any deductions you have (like the standard $12,000 deduction).
Multi-Member LLCs
Multi-member LLCs are also exactly as they sound and typically do receive 1099 forms. They are LLCs with multiple members/officers that have control, or “a say”, in how the business operates. This also doesn’t mean you don’t have contractors or even employees, it just means there are only a select number of controlling persons. This entity is also typically treated as “pass-through” and the income flows through to each member, proportionally to their stake.
An Example:
If you have a 60/40 split with a partner and the LLC makes $100,000, with $50,000 in expenses, $30,000 (60% x $50,000 net income) would “flow through” to your tax returns, and $20,000 (40% x $50,000 net income) would “flow through” to your partner’s tax returns. Assuming you and your partner have no other income sources, you will enter $30,000 as “gross income” and pay taxes on $30,000 minus deductions.
Your partner will enter $20,000 as “gross income” and pay taxes on $20,000 minus deductions.
These entities are also often regarded as “Partnerships”.
S-Corporation
We won’t dive too deep into S-Corporations here, as they do not apply to most freelancers, especially beginning freelancers. However, S-Corporations are a structure type that is primarily set up for tax advantages, and taxes do not simply flow through to individuals, they also typically do not receive 1099s.
Will My LLC Receive Form 1099-NEC?
Yep–chances are, if you have an LLC for your freelancing practice, you will receive a 1099-NEC form. The exception is if you are structured as an S-Corporation.
Issuing 1099-NEC Form as a Freelancer | When should LLCs issue 1099s?
For many of us, we may actually have to send out 1099 forms too! If you paid anyone (or another LLC) $600 or more over the year, you should ALSO be sending out 1099-NEC forms. To send 1099-NEC forms, you can download them directly, then fill out and send via attachment, or use a website/software that has 1099-NEC functionality, like QuickBooks, or IRS Tax Filings.
Remember, the deadline to issue 1099-NEC forms to your contractors is January 31st, for the most recent year.
FAQs:
Do I Need to Send a 1099 to an LLC?
If you or your business paid an LLC more than $600 over the year, yes–you should send the LLC a 1099-NEC form. If you are a freelancer, and haven’t paid anyone, you don’t need to send anything.
What type of LLC needs a 1099?
Generally, only single-member or multi-member LLCs (non-corporation) should receive a 1099. If you have your own LLC, and were paid over $600, you should receive a 1099. If you paid another LLC $600 or more, you should send them a 1099, unless they are structured as a corporation.
Does an LLC C Corp Get a 1099?
No–LLCs that are structured as a C-Corporation, or S-Corporation should not receive 1099 forms, since they have special tax implications compared to single-member and multi-member LLCs.
