Business structure/1099 questions

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Apr 7, 2009 2:33 pm

For those of you operating under a corporate or LLC structure and not as a sole proprietor, how did you structure and how do you flow revenues to the business entity when we get 1099 as individuals?  I want to form a LLC but am having a hard time getting over the fact that the commissions get paid to me personally via 1099.  Any help out there?

Apr 7, 2009 2:52 pm

We formed an LLC and on the LLC tax return we detail out the company expenses and show no income for the LLC. This negative will then flow through to the individual return to offset the 1099 income.

Apr 7, 2009 6:42 pm

LLC is simply a passthrough.. And my accountant does the other part..

Apr 8, 2009 2:19 pm

I went the Sub S corp way and I route the 1099 from Ray Jay to the Sub S.  IRS does ask about it once in awhile and I shoot them a copy of my company tax return to show them where it is accounted for.  Check this out with your accountant.

 
IndyEDJ
Apr 8, 2009 9:01 pm

Thanks for the response.  So you mean that you report your 1099 income as your Sub S ( or LLC for others) revenue.  Do I have that right? Sorry to be so basic but i want to get it right.  Thanks again.

Apr 9, 2009 5:56 pm
EXMLBAI:

Thanks for the response.  So you mean that you report your 1099 income as your Sub S ( or LLC for others) revenue.  Do I have that right? Sorry to be so basic but i want to get it right.  Thanks again.

 
Yes.  If you want to avoid the occasional IRS question, also prepare a schedule C, showing the 1099 amount under revenue and showing an expense item at the bottom for the exact same acount.  My explanation for the expense item is something to the effect of "income is resported through S-Corporation XX-XXXXXXX".  The schedule C shows a net zero and hopefully eliminates your IRS question.  I think the IRS is well aware that commissions must be legally paid to individuals (although somehow bank programs get around this...I never got a 1099 when I worked for a bank), but they appear to be satisfied with this explanation as long as they can trace an equal or greater amount to the entity you reference in yoru expense description.
 
As always, I'm not your accountant and you should not use this advice without consulting your tax advisor.