The form 1099 filing season is coming up next month and the IRS just released CCA 201447025 dealing with whether a business needs to issue a 1099 to a LLC.
A common misconception that I see very often is the assumption that a limited liability company (LLC) is a corporation. I even see this terminology in some of our internal documents (i.e. a reference to a limited liability corporation).
A LLC is a company, not a corporation. It can elect to be taxed as a corporation, but this has to be an affirmative election. By default, a LLC is either a sole proprietorship (only one member) or a partnership (more than one member).
Therefore, unless the LLC has affirmatively elected to be a corporation by filing form 8832, a business is required to issue a form 1099 to any LLC providing services in excess of $600 for the year.
On a similar note, a business that receives services from a medical service provider (including veterinary services) are required to issue a form 1099 even if the business is a corporation. Therefore, make sure to update your form 1099 reporting system to reflect these items.
As an agribusiness CPA and business adviser for CliftonLarsonAllen, Paul specializes in income taxation and accounting for the farm community. Email him at email@example.com
For more tax information and advice, read Neiffer's blog: The Farm CPA