Partnerships do not receive 1099s, but partners do

A partnership itself does not get a 1099 from clients or customers. Instead, the partnership files a Form 1065 (U.S. Return of Partnership Income) with the IRS, which reports the partnership's total income and expenses. Each partner then receives a Schedule K-1 from the partnership, which shows that partner's share of income, deductions, credits, and other tax items. The partner uses the K-1 to report their share on their individual tax return.

This is different from how sole proprietors and single-member LLCs work. Those business structures do receive 1099s from clients (if the client paid more than $600 in a year), and they report that income directly on their personal tax return using Schedule C.

The partnership structure exists partly because it separates the business's tax reporting from the individual partner's tax reporting. The partnership calculates what each partner owes in taxes based on their ownership stake, but the partners themselves pay the tax bill when they file their personal returns.

Key Takeaways

  • Partnerships file Form 1065 with the IRS and do not receive 1099s themselves.
  • Each partner receives a Schedule K-1 from the partnership showing their share of income and deductions.
  • Partners report their K-1 income on their personal tax return, not on a 1099.
  • Clients or customers still send 1099s to the partnership's address if they paid the partnership more than $600 in a year, and the partnership includes that income on Form 1065.

What happens when a client sends a 1099 to a partnership

When a client or customer pays a partnership more than $600 in a calendar year, they are required to send a 1099-NEC (for nonemployee compensation) or 1099-MISC (for miscellaneous income) to the partnership. The 1099 goes to the partnership's address and is addressed to the partnership name, not to individual partners.

The partnership receives the 1099 and includes that income on Form 1065. The partnership then allocates that income (and any related expenses) to each partner according to the partnership agreement. If the partnership agreement says one partner gets 60 percent of profits and another gets 40 percent, then the 1099 income is split that way.

The partnership does not file the 1099 with the IRS as if it were a sole proprietor would. Instead, the partnership reports the 1099 income as part of the partnership's total income on Form 1065, and the IRS matches the 1099 the client sent to the partnership's tax ID number.

How partners report their share of income on their personal return

After the partnership files Form 1065, it prepares a Schedule K-1 for each partner. The K-1 shows that partner's share of the partnership's income, losses, deductions, credits, and other items. A partner might receive a K-1 showing $50,000 in ordinary business income if that is their allocated share.

The partner then reports that K-1 income on their personal tax return. The form used depends on the partner's tax situation. Most partners report K-1 income on Schedule E (Supplemental Income and Loss) if they are passive investors, or on Schedule C (Profit or Loss from Business) if they actively work in the partnership and the partnership is taxed as a sole proprietorship or S corporation for their purposes.

Partners do not receive a personal 1099 for their share of partnership income. The K-1 is the document that shows their income from the partnership. If a partner also receives a 1099 directly from a client (because that client paid the partner personally, not through the partnership), then the partner reports both the K-1 and the 1099 on their personal return.

The difference between partnership income and 1099 income

A 1099 is a form that a payer sends to a payee to report a payment made. A partnership receives 1099s from clients, but those 1099s are sent to the partnership's tax ID number, not to the individual partners. The partnership then distributes the income shown on those 1099s to the partners via the K-1.

Partnership income includes everything the partnership earned: 1099 income from clients, income from sales, rental income if the partnership owns property, and any other revenue. The partnership calculates total income, subtracts expenses, and divides the net result among partners according to the partnership agreement.

If a partner receives a 1099 directly from a client (because the client paid the partner personally, outside the partnership), that is different. The partner would report that 1099 on their personal return separately from their K-1 income. This can happen if a partner does side work or if a client pays a partner directly by mistake.

Multi-member LLCs taxed as partnerships

A multi-member LLC (a business with two or more owners) is taxed as a partnership by default unless the owners choose otherwise. This means a multi-member LLC files Form 1065, each member receives a Schedule K-1, and the same rules explore: the LLC does not get a 1099, but clients send 1099s to the LLC's address.

Some multi-member LLCs choose to be taxed as an S corporation or C corporation instead. If an LLC is taxed as an S corporation, it still files a partnership-style return (Form 1120-S) and members still receive K-1s. If an LLC is taxed as a C corporation, it files Form 1120 and members receive dividends on a 1099-DIV, not a K-1.

The default is partnership taxation, so unless the LLC's owners have filed an election with the IRS (Form 8832 for C corporation or Form 2553 for S corporation), a multi-member LLC works like a partnership for tax purposes.

What partners need to keep for their records

Each partner should keep a copy of the Schedule K-1 they receive from the partnership. The K-1 is the document that shows their income and is what they use to file their personal tax return. Partners should also keep records of any 1099s they receive directly from clients, separate from the partnership.

If a partner receives a K-1 and also receives a 1099 from the same client, that usually means the client made a mistake or the partner did work outside the partnership. The partner should report both on their personal return and may need to contact the client or the partnership to clarify what happened.

Partners do not need to keep copies of the partnership's Form 1065 unless they want to review the partnership's overall income and expenses. The K-1 is the only document partners need to file their own taxes.

Frequently Asked Questions

Can a partnership receive a 1099 in its own name?

Yes. A client or customer can send a 1099 to a partnership's address using the partnership's name and tax ID number. The partnership receives it and includes that income on Form 1065. The partnership then allocates the income to partners via their K-1s. Partners do not receive personal 1099s for partnership income.

What if I am a partner and I also get a 1099 directly?

If you receive a 1099 addressed to you personally (not to the partnership), you report that 1099 on your personal tax return separately from your K-1. This can happen if you did work outside the partnership or if a client paid you directly by mistake. You should report both documents.

Do I need to file Form 1065 if I am a partner?

No. The partnership files Form 1065. You receive a Schedule K-1 from the partnership and use that to file your personal tax return. You do not file Form 1065 yourself unless you are the partnership's designated tax preparer or manager.

What is the difference between a K-1 and a 1099?

A 1099 is sent by a payer to report a payment made to a payee. A K-1 is sent by a partnership to each partner to report that partner's share of partnership income. Partners in a partnership report K-1 income, not 1099 income, on their personal returns.

Can a partnership be taxed as something other than a partnership?

Yes. A partnership can file an election to be taxed as an S corporation (Form 2553) or C corporation (Form 8832). If it does, the tax reporting changes. An S corporation files Form 1120-S and members still get K-1s. A C corporation files Form 1120 and members get dividends on a 1099-DIV instead.