Llc

[Burke]

I have a client, one of whose companies he represents on an independent contractor-commission-only basis, is telling him he MUST establish an LLC or they will not pay him any further commissions come 1/1/12. They also state this is "the law" and an IRS rule. However, they cannot furnish him with any relevant IRS ruling stating such, nor am I aware of any "law."
Comments? He represents several other companies in the same capacity who have issued no such mandate.

[ChEAr$]

Also have no knowledge of such a law.

It may of course be that company's own "law" that it will not deal with individuals in the future. There's no law against a business making it's own policy as to such matters.

I kinda suspect that is the case.

[Burke]

Me too, and that is what I told him two weeks ago. I suspect their lawyers have advised the company to go this route. Maybe that's why they think it is "the law." I'd love to know the reasoning behind it. What advantage is it to the company??? He has an EIN. Always good to get affirmation.

[jimmcg]

I have a client, one of whose companies he represents on an independent contractor-commission-only basis, is telling him he MUST establish an LLC or they will not pay him any further commissions come 1/1/12. They also state this is "the law" and an IRS rule. However, they cannot furnish him with any relevant IRS ruling stating such, nor am I aware of any "law."
Comments? He represents several other companies in the same capacity who have issued no such mandate.

There is no such IRS law or rule. They are only blowing smoke. They must have other motives behind their statement.

[Lion]

State?

Some states have gotten very aggressive about reclassifying ICs as employees, and then the feds do the same. Or, some states, such as FL?, have some regulations re workers' comp or some such that are pushing ICs to organize/incorporate. If he's going to lose an important client unless he forms an LLC, then it really doesn't matter whether or not it's a federal law. He has to decide if it's worth it to be "right" vs. being paid.

[oceanlovin'ea]

Yes, in Florida most contractors will not hire individuals to work for them. They must set up an LLC or corporation. This does have to do with Workers Comp rules. I think it also has to do with issuing 1099's....not having to issue to businesses...maybe. But I do know that the workers comp is an issue.

Linda, EA

[DTS]

I posted a similar thread some years ago. One of our members mentioned to me that many companies are only dealing "corp to corp". I'm not sure why, but that was the explanation.

[BOB W]

LLC would be a poor choice because if it becomes a SMLLC it is treated as a SP and I issue 1099s to any form of SP or PRTN, (LLC or not).

[Gretel]

Bob, I don't quite understand why you differentiate between SMLLC and multi-member LLC. Either one needs to get a 1099, only corporations are exempted.

[ChEAr$]

I seem to recall that LLC's having made the corporate choice are also exempt from being 1099 recipients.

[BOB W]

Bob, I don't quite understand why you differentiate between SMLLC and multi-member LLC. Either one needs to get a 1099, only corporations are exempted.

I thought that is what I said. When i re-read it is what I said. SP and Partnership get 1099s, LLC or not.

[Gretel]

Oops

Bob,

...yes, indeed, this is what you said. Missed the abbreviation for partnerships.

Harlan,

One would think that a LLC elected to be treated as corporation wouldn't need to get 1099. However, I wouldn't take a chance on this one with the increasing penalties.

[Lion]

Llc

I had a client with a pre-existing medical condition who could not get health insurance as an individual (except from our state cooperative at great cost) or sole proprietor but had lots of choices as a SMLLC. I really don't understand why, but after she did lots of research the SMLLC saved her a ton of money on insurance so she organized as a SMLLC with the state. That wasn't the OP question, but just thought I'd toss it out there as something that makes no sense with the tax laws we work with but can lead to the choice of a certain entity over other choices by our client dealing with more than just taxes.