Hi, EMSO, congrats on starting your business!
Let me address your question in three separate parts:
1. W2 employees: The tax treatment for a W2 employee is the same regardless of how long their employment lasted. Whether they worked for you for an hour, a day, a month, or over many years, you are required to pay them as an employee, including withholding federal, state (if applicable) and FICA taxes, and are responsible for remitting the payroll taxes to the federal or state government, and are responsible for remitted required payroll tax reports. So regardless of how long they worked for the company, your tax responsibilities remain the same.
2, 1099 Contractors: if you hire a subcontractor, you are required to issue a 1099NEC to that contractor if you pay them over $600 during the year. So, if you had a subcontractor that you paid less than $600 during the year, you do not have a filing requirement to issue a 1099NEC for that contractor.
3. With regards to switching your status from employee to subcontractor - as a Single Member LLC (SMLLC), you do NOT pay yourself from the business as either an employee or a subcontractor (note, this answer would be different if your SMLLC has elected to be taxed as a different entity, such as a C-Corporation or a S-Corporation), A SMLLC is treated like a sole proprietor for tax purposes, meaning you would report the SMLLC income and expenses on your personal tax return on Schedule C. Your SMLLC would NOT pay you either as a W2 employee or as a 1099NEC contractor; rather, you will be taxed on the total net income of the business on your personal tax return.
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