One member of a two member LLC received a 1099 payment. The check and 1099 was made out to the member personally – not the LLC.  Can this “personal” 1099 be included in the LLC as income? The payment is related to the LLC’s purpose and mission.

 


 

Answer – The short answer is yes, but it’s not recommended.

LLC’s are typically created to separate business and personal assets.  Even though the work may have been legitimately for the activities from the LLC, may call that separation into question should there be an audit.  Should the LLC ever be audited or sued, several factors will be evaluated, one of which is including the separation of business finances from the owner’s finances.  This point becomes more important if the LLC is taxed as a corporation vs partnership or sole proprietorship.

You have two options for endorsing the check that was paid to the partner rather than the LLC.

  • Write “For Deposit Only” along with the LLC’s name and account number. This is considered as a restrictive endorsement where the check can only go through the LLC’s bank account under your name.
  • Write “Pay To” along with the LLC’s name and having the partner sign their name. This is called a special endorsement where you are essentially giving the check to another “person” (in this case the LLC) to deposit in this other “persons” account.

While this isn’t ideal, the funds can be deposited with the LLC. Just try to not make it happen often so the LLC’s liability protection isn’t put at risk.