Do LLCs Get 1099s? What You Need to Know

Understanding whether a limited liability company (LLC) should receive a 1099 is a common challenge for small business owners, freelancers, and anyone hiring independent contractors. The rules can feel confusing because the Internal Revenue Service (IRS) looks at how an LLC is taxed rather than its legal structure. Getting this right matters. Issuing the correct 1099s helps you stay compliant, avoid penalties, and maintain clean records for tax season. It also helps if you operate your own LLC and want to know what to expect when working with clients.

In this guide, we break down the IRS rules in a simple, practical way so you can confidently manage all your LLC 1099 requirements throughout the tax year.

Key Highlights

• LLCs may or may not receive a 1099 based on how they are taxed, not the fact that they are an LLC.

• Single-member LLCs and multi-member LLCs are generally treated as sole proprietors or partnerships for small business 1099 filing rules.

• LLCs taxed as corporations usually do not receive 1099s, with important exceptions such as payments for legal services.

• Payments for services of $600 or more typically require IRS Form 1099-NEC, Nonemployee Compensation. Certain other payments may require IRS Form 1099-MISC, Miscellaneous Information.

• Payments made through third-party processors may be reported on IRS Form 1099-K instead.

• Reviewing a vendor’s IRS Form W-9, Request for Taxpayer Identification Number and Certification, is the easiest way to confirm their tax classification.

• Maintaining clean records and issuing 1099s on time helps reduce IRS audit risk and simplifies your tax filings.

What Determines Whether an LLC Gets a 1099

Tax classification of the LLC

The key to understanding 1099 rules is that the IRS does not treat all LLCs the same. Tax classification determines whether the LLC should receive a 1099.

Single-member LLC 1099

A single-member LLC (disregarded entity) is treated as a sole proprietorship by the IRS for federal tax purposes. Under IRS guidance on LLC tax classification, payments to this type of LLC generally follow the same 1099 rules that apply to any sole proprietor.

Multi-member LLC 1099

A multi-member LLC is typically taxed as a partnership unless it elects corporate status. In this case, payments made to the LLC for services usually require a 1099 when they meet the filing thresholds. 

LLC electing S corp or C corp status

An LLC can choose to be taxed as an S corporation or a C corporation. When this election is made, the entity is treated as a corporation for 1099 purposes. Since corporations are usually exempt from receiving 1099s, most payments to these LLCs will not require a 1099.

Why classification matters for 1099 reporting

Because the IRS uses tax classification rather than legal business structure, two LLCs can be treated very differently for 1099 purposes.

• LLCs taxed as sole proprietors or partnerships often must receive a 1099 for service payments.

• LLCs taxed as corporations generally do not, unless an exception applies.

This is one example of why reviewing a vendor’s W-9 early in the relationship is essential. It gives you clarity before payments begin adding up throughout the year.

When LLCs Must Receive a 1099 (1099-NEC or 1099-MISC)

Nonemployee compensation and service payments

If you pay an LLC for services and the total exceeds $600 in a calendar year, you typically must issue Form 1099-NEC. This rule applies to many common nonemployee contractor relationships, including:

• Freelancers

• Consultants

• IT professionals

• Marketing or design contractors

• Service-based businesses of any kind

Other reportable payments (rent, royalties, legal fees, and more)

Some types of payments fall under Form 1099-MISC instead. You may need to issue a 1099-MISC for:

• Rent

• Royalties

• Medical and healthcare payments

• Other miscellaneous income categories defined by the IRS

Payments for legal services are a significant exception. You must report these payments on your tax return even if the law firm or LLC is taxed as a corporation. 

Sales of goods for resale, when 1099-MISC may apply

In some resale situations, a 1099 may apply. For example, if you sell $5,000 or more of consumer products on a buy-sell or commission basis, this may require a 1099-MISC or, depending on the transaction structure, an LLC 1099-NEC. These scenarios are explained in IRS instructions for Forms 1099-NEC and 1099-MISC.

When LLCs Generally Don’t Get a 1099

LLCs taxed as a corporation and not providing legal/other special services

In most cases, you do not have to issue a Form 1099 to an LLC taxed as an S corporation status or a C corporation tax status. The only meaningful exceptions are for:

• Legal services

• Certain specialized payments

This is why checking the entity’s W-9 is essential. An LLC name alone does not indicate whether it’s taxed as a corporation.

Payments made via third-party payment processors or credit cards (1099-K instead)

If payments to an LLC are made through a third-party platform such as PayPal, Stripe, or Square, you may not need to issue a 1099-NEC yourself. Instead, the processor may issue a 1099-K for LLCs if it meets current reporting thresholds.

This distinction helps avoid duplicate reporting between businesses and payment processors.

Special Considerations and Exceptions

When classification is unclear — checking the LLC’s W-9

Because “LLC” appears in the business name regardless of tax classification, you cannot determine filing requirements based on the name alone. Request a Form W-9 from every vendor or contractor before payment. The form tells you exactly:

• Whether the LLC is taxed as a sole proprietor, partnership, or corporation

• Whether a 1099 is required

• The correct taxpayer identification number to use

This helps prevent mistakes that commonly trigger IRS notices.

Legal and medical payments exception

Payments for legal services are always reportable, even if the LLC is taxed as an S corp or a C corp. Some medical and healthcare payments may also require reporting regardless of tax classification.

Payment processors and 1099-K complexity

If your LLC receives payments from online platforms or marketplaces, you may get a 1099-K instead of a 1099-NEC or 1099-MISC. This form is issued when payment networks meet specific thresholds.

Understanding which form you should expect helps keep your books aligned with IRS reporting.

What LLC Owners Should Do: Next Steps and Best Practices

Whether you operate your own LLC or hire other professionals to do it for you, these steps help you stay compliant and ready for tax season.

• Collect a W-9 from every contractor or vendor before payments begin.

• Track payments by category. Services and certain other payments require 1099s, while goods generally do not.

• Maintain accurate year-round records so you know when payments hit IRS thresholds.

• Consider using the IRS’s free electronic filing system for information returns. 

• When uncertain, issue the 1099. Over-reporting is usually safer than under-reporting.

If you need help organizing these forms or managing vendor payments, 1-800Accountant, America's leading virtual accounting firm, offers support through professional bookkeeping, year-round advisory services, and guided tax preparation.

What This Means for Small Business Owners and Freelancers

Many small business owners form LLCs to simplify liability protection and look more professional to clients. But forming an LLC does not automatically change your 1099 obligations. Your tax classification determines whether you receive 1099s from clients and whether you need to issue them to vendors.

Missing required 1099s can lead to penalties and frustrated accountants at tax time. For independent contractors and entrepreneurs already juggling many responsibilities, staying on top of IRS reporting rules can feel overwhelming. That's where 1-800Accountant can make a material difference in your operations.

If you have complex vendor relationships, mixed payment types (services + goods), or use payment processors, our affordable, tax-deductible income tax preparation solution can help you stay compliant and avoid surprises. Schedule a free consultation today to learn about how our accountants and tax professionals can help you prepare for tax season.