As an entrepreneur, it can be exciting to strike out on your own and make dreams a reality. Being your own boss is a nice perk too, as this means that you can make your own hours.
However, there are certain hardships you have to endure that aren’t present when you work as a regular employee. For example, there are several tax forms you need to fill out to ensure that your business is compliant.
You may have opted to co-own a company to make things easier. But do partnerships get a 1099? Read on to find out.
What’s a 1099?
Before we answer the main question, it’s important that you understand what a 1099 is in the first place.
IRS Form 1099 is actually a collection of forms, not a single one. These informational tax forms are used to report various types of income other than wages, salaries, and tips. They’re typically issued by payers to individuals or entities who have received certain types of income during the tax year.
Below are some of the most common 1099 forms available:
- 1099-MISC (miscellaneous income)
- 1099-INT (interest income)
- 1099-DIV (dividends and distributions)
- 1099-R (distributions from pensions, annuities, retirement or profit-sharing plans, IRAs, insurance contracts, etc.)
- 1099-B (proceeds from broker and barter exchange transactions)
- 1099-G (certain government payments)
Do note that these are only a fraction of the 1099 forms the IRS has. There are also other variants for specific types of income, but they’re more obscure.
Do Partnerships Get a 1099?
Now that you know what 1099 forms are, it’s time to answer the original question. The partnership itself usually won’t receive 1099 forms, so if you’re wondering if partnerships get 1099s, then the answer is usually “No.” However, the owners within the company may receive them, depending on the income they get from the partnership.
Many entrepreneurs choose to form limited liability companies (LLCs), so you may be interested in that too. In that case, use our business registration service, which has a convenient name checker. We can get you registered in all 50 states.
Do LLC partnerships get 1099 forms though? In this specific case, yes, they’ll get Form 1099-NEC (nonemployee compensation). As for the question, “Does a single-member LLC get a 1099?” the answer is also yes, as they’ll get Form 1099-NEC as well.
Keep in mind that for LLCs, clients who pay over $600 in a year for your services must issue you a 1099-NEC form. Plus, if you’ve bought consumer products worth $5,000 or more and you resell them, the businesses that sold you these products must issue you either a 1099-NEC or 1099-MISC form.
As for corporate partnerships, here’s how it works.
Individual Partners
The company’s owners are individuals or other entities that have invested in the partnership. They may be otherwise involved in its operations as well.
When the partnership generates income or incurs losses, each partner’s share of that income or loss is determined according to the partnership agreement. They’ll typically receive distributions based on their ownership or participation in the partnership’s activities.
Income Reporting
The partnership itself is a separate legal entity, but it’s not taxed at the entity level like a corporation. Instead, it’s a pass-through entity, meaning that the profits and losses “pass through” to the owners. They’ll then report these profits and losses on their individual tax returns.
The partnership will file Form 1065, US Return of Partnership Income. This allows you to report the partnership’s income, deductions, gains, losses, etc.
As for each partner, they’ll each get a Schedule K-1 (Form 1065). This outlines each partner’s share of the partnership’s income, deductions, credits, etc.
K-1 Forms
As we’ve mentioned above, the partnership must provide the owners with Schedule K-1s (Form 1065). These individuals will use the information on the K-1 to report their share of the partnership’s income on their own tax returns.
These forms must be given out by the tax filing deadline, which is typically March 15th for calendar year partnerships. Otherwise, it’s the 15th day of the third month following the close of the partnership’s tax year.
Tax Reporting
Business owners must report the above on Schedule E (Supplemental Income and Loss) of their Form 1040. In addition, they may also need to report other items from the K-1 on various other forms or schedules of their individual tax returns, depending on the specific nature of the income or deduction.
Partnerships Don’t Get a 1099
By now, it should be clear that the answer to the question, “Do partnerships get a 1099?” is “No.” Generally speaking, the individual partners will likely receive 1099s, depending on their circumstances.
The exception is if you have an LLC. Whether you’re a single or multi-member company, you’re probably going to get Form 1099-NEC, and maybe 1099-MISC as well.
If you’d like to form a partnership, we can help. Sign up with Business Anywhere today and utilize our expertise to get started quickly.
