1099 and K1 question

[Jason Carter]

My wife and I formed an LLC with a few investors to buy a strip center. We closed in August. In the process of setting up management we have encountered a question involving our LLC and 1099s.

Shouldn't management send out distributions to each LLC member and then issue one 1099 for the LLC which we send to the accountant, who then sends a K-1 to each investor? We have asked our accountant and he agrees with this scenario.

Our current management company says they have to send 1099 to each investor, as they have to send one to each person they write a check to. Their accountant is telling them they have to. 

Anyone have any input in how you have similar partnerships set up? 

[Linda Weygant]

They are both right.

Your accountant has the structure down properly and this is the way it should go.

However, the property manager, if they are writing checks to individual members, is correct that this is a requirement for them. The questions is, why on earth is the property manager writing checks to each individual member? They should be writing one check to the LLC and then the LLC should be distributing from its account. This then complies with how you have it set up and with how the accountant is saying it needs to go.

If the property manager is writing checks out to individuals, stop it.