The short answer, then the reasons
A US company is about to pay a contractor that operates as a company, an LLC on the invoice or “Inc” in the name, and the bookkeeper asks the same question every January. Do we 1099 this one?
The short answer: you generally do not 1099 a corporation, you sometimes 1099 an LLC, and you never decide by looking at the business name. You decide by reading the contractor’s Form W-9. The rest of this guide gives the verified rule with the IRS citations attached, the one exception that catches people every year, and a decision table you can keep next to your vendor file.
One note before we start. This is general information, not tax or legal advice. Reporting outcomes turn on the facts of your situation, so confirm the specifics with a qualified tax professional before you file.
What the IRS actually says about corporations
The governing source is the IRS Instructions for Forms 1099-MISC and 1099-NEC. Under the list of payments that are generally not required to be reported, the instructions name:
“Generally, payments to a corporation (including a limited liability company (LLC) that is treated as a C or S corporation).”
Read the parenthetical, because it answers half the question on its own. The corporation exemption does not stop at entities with “Inc” in the name. It extends to an LLC that has elected to be taxed as a C or S corporation. To the IRS, that LLC is a corporation for this purpose, and you generally do not send it a 1099-NEC.
So far so simple. A corporation, or an LLC taxed as one, is generally outside the 1099-NEC regime. The complications all live in the word “generally.”
The exception that catches people: legal services
The corporation exemption has carve-outs, and the one that trips up the most payers is legal services. The same IRS instructions state plainly:
“The exemption from reporting payments made to corporations does not apply to payments for legal services.”
The instructions list attorneys’ fees among the reportable payments to corporations, reported in box 1 of Form 1099-NEC. In other words, if you pay a law firm for legal work, you report it even when the firm is a corporation. The fact that your lawyer is incorporated does not get the payment out of the 1099 net. This is the single most common place a finance team gets the corporation rule wrong, because every other corporate vendor is exempt and the law firm feels like one more of them.
There are a handful of other reportable-to-corporation items in the instructions, but for a typical US company paying service contractors, legal services is the exception that matters.
Why an LLC is the hard case
A corporation is easy. An LLC is the one that forces you to look closer, because “LLC” is a state-law label, not a federal tax classification. The same three letters on an invoice can map to three different tax treatments, and only one of them is exempt.
An LLC can be taxed as a corporation, in which case it rides the corporation exemption above and is generally not reportable. An LLC can be a single-member disregarded entity, in which case the payment is generally reportable. A multi-member LLC is generally taxed as a partnership, which is also generally reportable. You cannot tell which one you are dealing with from the name. You have to read the W-9.
The disregarded-entity case
The single-member LLC is worth its own moment, because it surprises people. When a single-member LLC is a disregarded entity, the IRS looks straight through the LLC to its owner.
The Instructions for the Requester of Form W-9, reflected in the Form W-9 instructions themselves, say that for a disregarded entity the reporting flows to the owner:
“information for disregarded entities is reported as the owner’s name on line 1, and the disregarded entity’s name is entered on line 2.”
That is why a contractor’s W-9 sometimes shows an individual’s name and Social Security Number even though they invoice you under “Acme Design LLC.” The LLC is disregarded, the owner is the taxpayer, and if you issue a 1099, it goes to that owner. The LLC name is on line 2 for your records, but the reportable party is the person on line 1.
You do not guess. You read the W-9.
Every decision above comes from one piece of paper: the contractor’s Form W-9. Before you pay a US contractor, you collect a W-9, and the federal tax classification box on line 3a tells you what they are.
The Form W-9 line 3a choices include individual or sole proprietor or single-member LLC, C corporation, S corporation, partnership, trust or estate, and limited liability company. For an LLC that is a disregarded entity, the IRS instructions direct it to “fill out line 3a by checking the appropriate box for the tax classification of its owner.” Whatever the contractor checks is what you rely on. You do not look the entity up yourself, and you do not infer the classification from the business name. The W-9 is the payer’s documentation for the call you made, so keep it on file.
Decision table
| What the W-9 shows | Common entity | Generally 1099-NEC reportable? | Exception |
|---|---|---|---|
| C corporation or S corporation | Inc, or an LLC taxed as a corporation | No, generally exempt | Yes, for legal services and attorneys’ fees |
| Individual or sole proprietor | Freelancer, sole prop | Yes, if 600 dollars or more for services | None for ordinary services |
| Single-member LLC, disregarded entity | One-owner LLC taxed through the owner | Yes, 1099 issued to the owner on line 1 | None for ordinary services |
| Partnership, including multi-member LLC | Two-or-more-owner LLC, LP, general partnership | Yes, generally reportable | None for ordinary services |
| Foreign entity, no W-9 | Overseas company | No, outside the 1099-NEC regime | Gives Form W-8BEN-E instead, see below |
The business name does not appear in this table on purpose. “LLC” in the name decides nothing. The line 3a classification decides everything.
Foreign entities are a different path
Notice the last row. The 1099-NEC regime is built for US persons, and a foreign company is not on it. A foreign entity does not give you a W-9 at all. It gives you a Form W-8BEN-E, which documents its foreign status and pulls it out of the 1099-NEC question entirely.
That does not mean a foreign company is automatically free of all US reporting. Whether any US tax or withholding applies turns on a separate analysis, US-source versus foreign-source income and Form 1042-S, which we walk through in US-source vs foreign-source contractor income. The point for this guide is narrow: do not chase a 1099-NEC for a foreign entity. Collect the right W-8 and run the cross-border analysis instead.
A quick decision path
Three steps for any US company-shaped contractor you pay:
- Collect the W-9 before you pay. No W-9, no informed decision. The federal tax classification on line 3a is the answer to almost everything that follows.
- Check line 3a. A C or S corporation, including an LLC taxed as one, is generally exempt. A disregarded single-member LLC, a partnership, or an individual is generally reportable.
- Flag legal services. If the payment is for legal work, report it even when the payee is a corporation. This is the exception that survives the corporation rule.
Run those three and you have the call for nearly every US contractor on your books. For the foundational terms, see our glossary entries on Form 1099-NEC, the disregarded entity, and Form W-9.
When a platform handles it for you
A US founder paying one incorporated contractor can read a W-9 by hand. A US team paying dozens of contractors, some incorporated, some disregarded LLCs, some foreign, is tracking W-9s against W-8BEN-Es, classification boxes, the legal-services exception, and year-end reporting deadlines, and that is where the manual approach starts to leak.
Omnivoo Contract Management handles it for a flat $49 per finalized contract. We collect the right tax form, run the KYC, draft and manage the contract, and pay your contractors in 150+ countries, end to end. Transaction fees are passed through at cost, with no FX markup and no subscription.
Want the answer for your specific setup? See how Omnivoo Contract Management handles contractor onboarding end to end, or talk to our team.