The IRS requires businesses to report payments made to outside contractors on an annual information return called Form 1099-MISC. Companies do not all have the same tax classifications, so it is important to know the status of each company with which you are working. A limited liability company (LLC), in particular, can be tricky to understand, but the IRS makes clear distinctions when it comes to knowing under what circumstances you must issue a 1099-MISC form to an LLC.

Disregarded Entities

There are several types of LLCs, each with a different tax classification. If a company has a single member or owner, it is considered a "disregarded entity" by the IRS for tax purposes. That means the company and the owner are viewed as the same. All income, credits and business deductions are reported through the owner's tax return on Form 1040. As a disregarded entity, a single-owner LLC should receive a 1099-MISC form for business services they perform—unless it has chosen a different filing status.

You can't assume that because an LLC has a single owner, the company is a disregarded entity. LLCs with single owners can elect to be treated by the IRS as either a C-corporation or an S-corporation. If the owner formally makes this choice, then you do not need to issue a 1099. However, you cannot determine a company's tax classification status simply by looking at the company name. To find out the tax classification and legally cover your bases with the IRS, you need to request this information on a W-9.


A party responsible for issuing 1099s should keep on file the tax classifications of all vendors or contractors. The IRS designated form for this is a W-9, also known as a "Request for Taxpayer Identification Number." The form asks for the business name, trade name if used and its taxpayer identification number. Box 3 also asks for its tax classification. If the contractor checks the box marked "Individual/Sole proprietor or single-member LLC," then the company is a disregarded entity, and you must send it a 1099-MISC. If it checks any of the boxes stating that the company is treated as a corporation, then you do not send a 1099.

Record Keeping

Keep copies of the various IRS documents you obtain or issue for each contractor that does work for your business. Ideally, you should have each contractor complete a W-9 form before they do any work. This avoids any questions or delays when it comes time to issue the 1099-MISC forms at year-end. Also, you must send a copy of each 1099-MISC issued to the IRS. W-9 forms do not need to be filed with the IRS as they are only for your information.