I was interested to see you write that "Although business owners should not issue themselves 1099s (while they are owners)". Could you explain more about this? Do you mean that business owners can't issue themselves a 1099 to report compensation for managing the LLC?
I co-own an LLC and our Operating document expressly states that "(6) Compensation: Members shall not be paid as members of the LLC for performing any duties associated with such membership, including management of the LLC. Members may be paid, however, for any services rendered in any other capacity for the LLC, whether as officers, employees, independent contractors or otherwise." Similar to the initial questioner, my partner and I both provided services as independent contractors before buying the business. We've continued to provide those service (having nothing to do with the management of the business) since purchasing the business though we do so in different proportions. Separating compensation for these services from the 50/50 split for our ownership is essential to ensure fair compensation and distribution.
Any further insight you could provide would be very helpful.
Thanks,
Kelly
