Is it legal for a company that currently pays me as a 1099 contraactor to refuse to pay me as an LLC?

UPDATED: May 29, 2012

Advertiser Disclosure

It’s all about you. We want to help you make the right legal decisions.

We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.

Get Legal Help Today

Compare Quotes From Top Companies and Save

secured lock Secured with SHA-256 Encryption

Is it legal for a company that currently pays me as a 1099 contraactor to refuse to pay me as an LLC?

In the process of expanding my independent consulting business I have registered an LLC in order to give my business a brand and in order to protect my personal assets. When I approached the company to request that they start paying me in the name of the LLC, they flat out refused. Is this legal? What are my options?

Asked on May 29, 2012 under Employment Labor Law, California


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

It is completely legal. Remember: there is no obligation or requirement that a company contract with or employ any given freelancer, independent contractor, or other business at all--they decide for themselves who to work with. They are completely free to decide whom to hire or contract with, and are equally free to put conditions on their employment of others--such as that they will only pay to a person, using his/her social security number, and not to an LLC, using its employer ID number.

By the way, there is at least one good reason for doing this: contracting with and paying you as a natural person (i.e. on a 1099 basis, but in your name, based on your SSN) means that in the event of some tortious act committed by you, a breach of contract by you, an overpayment to you which they want to recover, etc., they could proceed against your personally. However, if they contract with and pay your LLC, for many cases, their only recourse would be against the LLC itself, not you personally. Since if your LLC does not have significant assets, you could easly just walk away from it, dealing with the LLC, not you, reduces their recourse.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

Get Legal Help Today

Find the right lawyer for your legal issue.

secured lock Secured with SHA-256 Encryption