If a Company Is Incorporated, Does It Need a 1099?

If a company is incorporated, you generally do not need to send it a 1099. The IRS exempts both C-corporations and S-corporations from Form 1099-NEC and Form 1099-MISC reporting for most types of payments.¹ A few payment categories break that rule — legal fees are the big one — and the “incorporated” label itself turns out to be slipperier than it looks once LLCs enter the picture.

Why Corporations Are Exempt

When your business pays an unincorporated vendor $600 or more for services during the year, you typically owe that vendor a Form 1099-NEC.² Individuals, sole proprietors, partnerships, and most LLCs all fall into that bucket.

Corporations are treated differently. The reasoning is practical: a C-corporation files Form 1120 and an S-corporation files Form 1120-S, so the IRS already receives a detailed return showing the corporation’s income. A second paper trail from every payer would be redundant.

In practice, the exemption covers the ordinary payments businesses make most often: consulting fees, contractor invoices, software development work, marketing services, and rent paid to an incorporated landlord or property management company. If the vendor’s Form W-9 shows a corporate classification, those payments drop off your 1099 list.

Payments That Require a 1099 Even When the Vendor Is Incorporated

The corporate exemption has holes. A handful of payment types must be reported no matter what box the recipient checked on its W-9.

Legal Services

Any payment of $600 or more to an attorney or law firm for legal services goes on Form 1099-NEC, box 1, even if the firm is a professional corporation.³ This is the exception businesses hit most often, and it is the single most common place the “corporations are exempt” shortcut goes wrong.

A separate rule applies when you pay an attorney gross proceeds connected to a legal matter rather than fees for the attorney’s own services. Those payments go on Form 1099-MISC, box 10. If an insurer sends $100,000 to a plaintiff’s attorney to settle a claim, the full amount is reported as gross proceeds on the 1099-MISC, not as legal fees on the 1099-NEC.

Medical and Health Care Payments

Payments of $600 or more to a physician, hospital, or health care provider are reported on Form 1099-MISC, box 6, even if the provider is incorporated. This typically applies to employers paying medical providers directly and to health insurers making payments under accident and sickness programs. Payments to tax-exempt hospitals and to hospitals owned and operated by the federal or a state government are not reportable.³

Cash Payments for Fish Purchased for Resale

Cash payments of $600 or more to anyone in the business of catching fish, when the fish is bought for resale, go on Form 1099-MISC, box 11, regardless of the seller’s corporate status.³ This one is narrow and mostly matters to seafood distributors and restaurants buying directly from commercial fishing operations.

The LLC Trap

LLCs are where this question goes sideways. An LLC is a state-law entity, not a federal tax classification. The IRS looks at how the LLC has elected to be taxed, not what the articles of organization say.

A single-member LLC defaults to sole proprietorship treatment. A multi-member LLC defaults to partnership treatment. In both default cases, you must issue a 1099 once payments reach $600.⁴ An LLC can elect corporate taxation by filing the appropriate forms with the IRS, and once it does, the corporate exemption applies to it for general service payments.

A vendor that looks and feels like a corporation — professional branding, “Company” in the name, multiple employees — may still be an LLC taxed as a partnership. Assumptions here create penalty exposure. The only reliable answer comes from the W-9.

How to Verify a Vendor’s Status

Form W-9 is the compliance tool that resolves this. Request a completed W-9 from any non-employee vendor before you pay them.¹ Box 3, “Federal tax classification,” tells you what you need to know.

C Corporation or S Corporation checked: no 1099 required, except for legal, medical, and fish payments.
Individual/sole proprietor checked: 1099-NEC required at $600.
Partnership checked: 1099-NEC required at $600.
LLC checked with tax classification “C” or “S”: treated as a corporation; same exemption.
LLC checked with tax classification “D” (disregarded entity) or “P” (partnership): 1099-NEC required at $600.

The IRS also offers a free TIN Matching service that lets you verify a vendor’s name and taxpayer identification number before you file.⁵ Catching a mismatch here is far easier than fixing one after the IRS sends a CP2100 notice.

Credit Card and Third-Party Payments Don’t Count

Even when a payment would otherwise require a 1099-NEC, you don’t issue one if you paid by credit card, debit card, or through a third-party payment network such as PayPal or Venmo for Business. The payment processor reports those transactions on Form 1099-K, and IRS rules prohibit double-reporting the same transaction.⁶

This narrows the universe of payments the corporate exemption question even applies to. Only checks, cash, ACH bank transfers, and wire transfers remain your responsibility to report.

What Happens If You Guess Wrong

The IRS imposes per-return penalties for failing to file a required information return, with the amount escalating the longer the problem goes unfixed:⁷

Filed within 30 days of the due date: $60 per return.
Filed after 30 days but by August 1: $130 per return.
Filed after August 1 or not filed at all: $340 per return.
Intentional disregard: $680 per return.

These apply separately to each return, so a business that missed 50 vendors could face $17,000 or more. The same amounts apply to incorrect statements sent to recipients.

The most common failure in this area isn’t sending a 1099 to a corporation that didn’t need one. It’s assuming a vendor is a corporation without checking the W-9, then discovering after the filing deadline that the vendor was actually a partnership or sole proprietor. Collecting a W-9 before you cut the first check eliminates that risk.

1
Internal Revenue Service. Information Returns (Forms 1099)
2
Internal Revenue Service. Am I Required to File a Form 1099 or Other Information Return?
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Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (Rev. April 2025)
4
Internal Revenue Service. Reporting Payments to Independent Contractors
5
Internal Revenue Service. Taxpayer Identification Number (TIN) Matching
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Internal Revenue Service. Form 1099-K FAQs: Third Party Filers of Form 1099-K
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Internal Revenue Service. Information Return Penalties