What do the letters LP or LLC stand for at the end of a company's name, and should these companies get a 1099 at the end of the year?

Follow

LP generally is short for Limited Partnership and LLC is short for Limited Liability Company.

In terms of 1099 reporting, it will depend partly on whether the company is incorporated. An LP is not a corporation and therefore would usually be subject to 1099 reporting. This would include organizations such as attorneys or accountants who have formed their businesses as an LP.

Payments to an LLC might be reportable, depending on how the LLC is set up in its state. Payments to an LLC that is not incorporated must be reported on a 1099. If the LLC is incorporated, it is not reportable. However, you should get the LLC to provide a W-9 to document its status. On older forms W-9, the IRS says if the LLC has checked the "Corporation" box on the W-9, it is not reportable. If the "Individual/Sole Proprietor" or "Partnership" box is checked, the LLC is reportable. On the 2008 form W-9, there is now a place for the vendor to indicate tax classification beside the LLC box. If the classification is "D" (disregarded entity) or "P" (partnership), then payment to the LLC of $600 or more is reportable; if the classification is "C" (corporation), payment to the LLC is not reportable. See the new W-9 form—the IRS modified the form so that LLCs can indicate their classification. Also see the Instructions for the requester of Form W-9.

It is a good business practice to require that all of your vendors provide you with Form W-9. Form W-9 is an IRS document that requires the taxpayer (in this case your vendor) to certify their taxpayer ID, their entity type (partnership, sole proprietor, corporation, LLC including tax classification...), and whether they are not subject to back-up withholding. Having a W-9 on file for each vendor ensures that you have the burden of proof with the vendor so that your 1099 reporting at the end of the year is accurate.

Finally, a good general rule is "when in doubt, report," since reporting does no harm to the recipient of the 1099, and it protects you.

Have more questions? Submit a request

Comments