The Internal Revenue Service (IRS) requires Form 1099 to report a range of income types, from non-employee compensation to asset sales. Limited liability companies (LLCs) receive them in much the same way as do individuals, typically by January 31st of the year following receipt of the income. In an LLC structure, income categories are generally passed to the business's owners for payment of the appropriate taxes.
Dividends and Interest
Form 1099-DIV reports distributions of capital gains as well as stock dividends. Form 1099-INT reflects earned interest from bonds, CDs, money market funds and savings accounts. While less frequently used, Form 1099-OID deals with an income category called original issue discount. Any kind of bond or long-term debt that was issued for less than its redemption value falls within this classification as a type of accrued income that must be reported. Any LLC that holds bonds or equities in the business name will receive these forms.
Securities and Real Estate Sales
If an LLC owns property that it chooses to sell, the purchasing entity or brokerage will report those transactions on the appropriate 1099. For bonds, stocks and other types of securities, the LLC will receive a Form 1099-B reflecting those sales. For real estate, Form 1099-S is used to report sales proceeds.
Any debts accrued in the name of the LLC that have been canceled are considered income and taxes must be paid on the amount forgiven. These types of financial arrangements are reported on Form 1099-C, which are then passed to each owner on a proportional basis for payment on their personal tax returns. Creditors, however, often require a personal guarantee, so under that circumstance, the individual responsible would have to pay the debt before it could be canceled.
For other income categories that do not have a separate form, such as non-employee compensation, royalties and rents, payers send out Form 1099-MISC. This applies to LLCs that perform contract work, are due royalties from intellectual property or own real estate. This is among the most widely used forms, as the work of independent contractors represents a large part of economic activity.
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