Do Incorporated Businesses Get a 1099? LLCs, Attorneys, Exceptions

Payments to incorporated businesses usually do not require a 1099. If your vendor is a C-corporation or an S-corporation, you can generally skip Form 1099-NEC for service payments of $600 or more, and you can skip Form 1099-MISC for most other payment types.¹ The exemption has a short list of exceptions, though, and misreading a vendor’s entity type can trigger IRS penalties starting at $60 per missed return and climbing from there.

The Corporate Exemption, in Plain Terms

When you pay a non-employee $600 or more during the year for services, the default rule is that you report the payment on Form 1099-NEC.² Corporations get a pass. The IRS does not require a 1099-NEC for payments to a C-corp or S-corp for services, because those entities already file their own corporate returns on Form 1120 or Form 1120-S.³ The same exemption carries over to most 1099-MISC payment types, including rent and royalties, unless the payment falls into one of the specific exceptions below.⁴

What matters is the vendor’s federal tax classification, not what the business calls itself. A company that filed articles of incorporation with a state but elected partnership treatment with the IRS is not “incorporated” for 1099 purposes. The box checked on the W-9 is what counts.

Tax-exempt organizations under Section 501(c) and government entities at the federal, state, and territorial level are also exempt from both 1099-NEC and 1099-MISC reporting.³ Hire a 501(c)(3) nonprofit for training or consulting and no 1099 is required at any dollar amount.

Foreign corporations fall outside this entire system. Instead of a W-9 you collect Form W-8BEN-E, and payments go on Form 1042-S with withholding, not on a 1099. Everything that follows applies to domestic entities.

LLCs Are Where People Get Burned

An LLC is a state-law entity that can be taxed in several different ways, and only one of those ways qualifies for the corporate exemption.

A single-member LLC with no special election is treated as a sole proprietorship for federal tax purposes, so you must issue a 1099-NEC once payments reach $600.¹ A multi-member LLC defaults to partnership treatment, and partnerships get 1099s too.

Everything changes if the LLC has elected to be taxed as a C-corp or S-corp. The election makes the LLC “incorporated” for reporting purposes, and the corporate exemption applies.³ You cannot tell from a company name which hat the LLC is wearing. Ask for the W-9.

When You Still Must Send a 1099 to a Corporation

The corporate exemption has a short list of carve-outs. In each of these situations, you file the 1099 even though the recipient is a C-corp or S-corp.

Payments to Attorneys and Law Firms

Every payment for legal services gets reported, full stop. Pay a law firm $600 or more for hourly fees, retainer work, or any other legal service, and you report the amount in Box 1 of Form 1099-NEC even if the firm is a professional corporation.³ This is the exception that catches the most businesses off guard, because it flatly overrides the corporate rule.

A separate obligation applies to gross proceeds paid to attorneys in connection with legal settlements. Under IRC Section 6045(f), when $600 or more passes through an attorney’s hands in connection with legal services, you report the full amount in Box 10 of Form 1099-MISC, regardless of how much the attorney keeps.⁵ A single settlement can trigger both reports: Box 1 of 1099-NEC for the attorney’s fee portion, and Box 10 of 1099-MISC for the total proceeds routed through the attorney.⁶

Medical and Health Care Payments

Payments of $600 or more to any provider of medical or health care services go in Box 6 of Form 1099-MISC, incorporated or not.⁶ Corporate radiology groups, physical therapy clinics structured as professional corporations, and similar entities are all in scope. The obligation sits on any business, health insurer, or government agency paying the provider directly.

Federal Executive Agency Payments

Federal agencies play by a stricter rule. When a federal executive agency pays a corporation for services, it files a 1099-NEC regardless of the recipient’s corporate status.⁷ This matters mostly to government contractors, who should expect a 1099 even when incorporated.

Fish Purchases and Substitute Payments

Two narrower carve-outs round out the list. Cash payments to corporations for the purchase of fish for resale (Box 11) and substitute payments in lieu of dividends or tax-exempt interest (Box 8) go on 1099-MISC regardless of corporate status.³

Card and Payment-App Payments Don’t Count

A rule that trips up a lot of careful bookkeepers: when you pay a vendor by credit card, debit card, or a third-party network like PayPal or Venmo, you do not issue a 1099-NEC or 1099-MISC for that payment. The payment settlement entity picks it up on Form 1099-K instead.⁶

So when you add up what you paid a vendor to decide whether you’ve crossed the $600 threshold, leave out everything paid by card or through a payment app. Only checks, cash, ACH, and wire transfers count. Double-reporting the same payment on both a 1099-NEC and a 1099-K is one of the more common filing errors the IRS sees.

For context on the other side of that split, the 1099-K reporting threshold for 2026 is $20,000 in gross payments and more than 200 transactions with the same payee, restored to its pre-2021 level by the One, Big, Beautiful Bill Act.⁸

Confirm the Entity Type With a W-9

Don’t guess. Collect a completed Form W-9 from every vendor you expect to pay $600 or more before you cut the first check.⁹ The W-9 gives you the vendor’s taxpayer identification number and their federal tax classification. On line 3a the vendor checks a box: individual, C-corporation, S-corporation, partnership, or trust.¹⁰

“C Corporation” or “S Corporation” is your documentation that the corporate exemption applies. “Individual/sole proprietor” or “Partnership” means a 1099-NEC is required once payments reach $600. For LLCs, the vendor has to write in their tax classification on the same line, which tells you whether the LLC elected corporate treatment.

When a Vendor Won’t Give You a W-9

If a vendor refuses or just never returns the form, you don’t get to shrug it off. You must begin backup withholding at 24 percent on future payments to that vendor and remit the withheld amounts to the IRS.¹¹ Backup withholding also applies when the IRS sends you a CP2100 or CP2100A notice flagging a name/TIN mismatch. You send the vendor a “B notice,” and if they don’t respond you must start withholding within 30 business days.¹² Those withheld amounts are reported on Form 945, not on the 1099 itself.¹³

What a Missed Filing Costs

Failing to file a correct 1099 by the deadline carries inflation-adjusted penalties for 2026 that scale with how late you are:¹⁴

Up to 30 days late: $60 per return
31 days late through August 1: $130 per return
After August 1 or never filed: $340 per return
Intentional disregard: $680 per return, with no annual cap

Annual maximums apply to every tier except intentional disregard. Large businesses, defined as those with average annual gross receipts above $5 million, face a ceiling of $4,098,500 per year at the highest standard tier. Small businesses with receipts of $5 million or less have a reduced cap of $1,366,000.¹⁵ A parallel penalty under Section 6722 applies when you fail to furnish a correct statement to the payee.

The businesses that get hit rarely made a deliberate choice to skip filing. They just didn’t have a W-9 on hand when January rolled around, and by then the vendor had stopped answering email. Collect the form before the first payment and the rest of this stops being a problem.

1
Internal Revenue Service. Am I Required to File a Form 1099 or Other Information Return
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Internal Revenue Service. Reporting Payments to Independent Contractors
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Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (Rev. April 2025)
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Internal Revenue Service. Information Returns (Forms 1099)
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Office of the Law Revision Counsel. 26 USC 6045 – Returns of Brokers
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Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (04/2025)
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Internal Revenue Service. Information Return Reporting for Federal Agencies
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Internal Revenue Service. Treasury, IRS Issue Proposed Regulations Reflecting Changes From the One, Big, Beautiful Bill to the Threshold for Backup Withholding on Certain Payments Made Through Third Parties
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Internal Revenue Service. About Form W-9, Request for Taxpayer Identification Number and Certification
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Internal Revenue Service. Instructions for the Requester of Form W-9 (03/2024)
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Internal Revenue Service. Backup Withholding
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Internal Revenue Service. Understanding Your CP2100 or CP2100A Notice
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Internal Revenue Service. Instructions for Form 945 (2025)
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Internal Revenue Service. Information Return Penalties
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Internal Revenue Service. Revenue Procedure 2024-40