IRS Questions: 1099 Requirements for Limited Liability Partnerships
Corporations, limited liability companies and limited liability partnerships of all sizes generally use a number of subcontractors and service providers to perform and deliver services. The Internal Revenue Service requires all corporations, LLCs and LLPs to issue 1099s to any of these individuals or entities classified as independent contractors. In addition, LLPs that provide services must receive 1099s.
According to the IRS, all businesses must send non-corporate service providers Form 1099-MISC for payments exceeding $600 in a given tax year. The payer must also file these 1099-MISCs with the IRS. Non-corporate service providers include those operating as individuals or groups including sole proprietors and general partnerships and those operating as separate legal entities including limited liability partnerships and LLCs. Therefore, your limited liability partnership must file and send 1099s for all applicable service providers who meet the $600 limit. Your LLP must also receive 1099s from customers who paid more than $600 in fees for the tax year.
An LLP is a general partnership that formally registered with the secretary of state to receive treatment -- and the resulting liability shielding -- as an entity separate from its partners. Most states require that LLPs solely provide professional services and that partners be licensed in that state to provide the service. This means that these states only allow general partnerships operating as law firms, accounting firms, engineering firms and architectural firms to register as LLPs. As a general partner in an LLP, you are not held responsible for another partner’s negligence unless you participated with or supervised that partner.
Your LLP must complete IRS form W-9, Request for Taxpayer Identification and Certification, and provide a copy to all clients that will need to send your LLP a 1099. Conversely, your LLP must also obtain W-9s from its own service providers that it will need to send a 1099. The W-9 contains the data needed to monitor payments made during the year and complete the 1099s after the tax year ends.
Your LLP must issue 1099s no later than January 31 following the end of the calendar year. It then must file these 1099s with the IRS by February 28. However, this filing deadline extends to March 31 if your LLP files electronically. The IRS may levy significant penalties if your LLP misses the filing deadline.
As a recipient of 1099s, your LLP should receive its 1099s from myriad customers within a week of mailing. Include these with your LLP's tax return. The IRS double checks the 1099s it received for your LLP against the information included on your LLP's tax return. If a discrepancy exists, your LLP could be penalized for underreporting income.