An LLC is a limited liability company, but how does it file? LLC: W-2 or 1099? In order to answer that question, we will break down:
- What an LLC is
- How an LLC is different from other business structures
- How an LLC is taxed
We will also detail how tax software like our base W-2/1099 Forms Filer program can help you leading up to and during the next tax season if you are filing as an LLC.
What is an LLC?
An LLC is a legal entity that can be created to own and operate a business. It has the personal liability protection of a corporation, but it can be taxed as a sole proprietorship or a partnership.
In 2025, the U.S. Census Bureau and Internal Revenue Service reported that in the previous year there were about 21.6 million active LLCs in the United States. It accounted for roughly 42.9% of all small businesses.
The benefit of an LLC is that it offers personal asset protection since owners are not subject to double taxation. However, LLC owners can also choose to be designated as a corporation. If they choose to do that, the entity is taxed in that way.
Business Structures and Tax Responsibilities
An LLC is typically owned by an individual. If an LLC is owned by one individual, it is a sole proprietorship. An LLC can also be owned as a partnership. These types of structures use pass-through taxation, where the owners themselves are taxed on the LLC’s profits.
A corporation is owned by its shareholders and is a taxable entity on its own. Shareholders undergo double taxation, meaning that the company’s profits are taxed first and then the shareholders are taxed again when they report profit shares on their individual tax returns.
LLC: W-2 or 1099
An LLC is allowed to be taxed as a sole proprietorship, partnership, or corporation. The answer to “LLC: W-2 or 1099?” depends on how you decide to designate the LLC.
In an LLC sole proprietorship:
- Profits are funneled through the owner
- The owner reports their profit shares on individual tax forms and returns
- You will be required to file income tax under a 1040 form for individual tax return and self-employment tax
If the LLC is a partnership, then you will:
- File Form 1065
- Use Schedule K-1 to report each partner’s pro-rata share of partnership income, credits, and deductions
If you decide to file your LLC as a corporation, then you will:
- Be subject to double taxation
- Need to file Form 8832 in order for the LLC to be considered a corporation
If you are responsible for reporting information on employees’ Social Security, Medicare taxes, and income tax withholding, then you will need to distribute and file W-2 and W-3 forms. If not, then you will distribute and file 1099 forms.
Frequently Asked Questions
- Is LLC tax filing software a good idea? – Yes, because LLC small business users with a straightforward tax situation can easily automate how they track income and expenses by investing in comprehensive tax filing software.
- Can an LLC deduct start-up costs? – Yes, an LLC can opt to deduct up to $5,000 of business start-up costs and as much as $5,000 for their organizational costs. Check specific limits that might affect your general ability. If you are struggling with handling deductions, payroll software can simplify the process while keeping you compliant.
AMS Support
Whether you choose to file an LLC as a sole proprietorship, partnership, or corporation, using our W-2/1099 Forms Filer can support your tax needs. Our tax software supports the W-2 and 1099 forms that you will need for your employees and makes it easy for you to upload those documents and keep them secure.
Keep your LLC W-2 or 1099 forms safe and ready for filing with our tax software. Then you can use our add-on E-File module to automatically file necessary forms to the IRS and/or the Social Security Administration. Download our free 1099-etc Demo software today and get started.