While often used to describe similar types of independent work, a C2C (Corp-to-Corp) arrangement and a 1099 arrangement are fundamentally different in one key way: the contracting entity. The 1099 is actually a tax form, not a business model, while C2C describes a specific business model.
What is a 1099 Independent Contractor?
A 1099 independent contractor is an individual, often a freelancer or sole proprietor, who is hired by a business to perform a specific service. The term “1099” comes from the IRS Form 1099-NEC, which the hiring business uses to report payments of $600 or more made to a non-employee.
The relationship is between the hiring company and a single person. The individual contractor is personally responsible for paying all of their own taxes, including self-employment taxes (Social Security and Medicare, which are typically split between the employer and employee for a W-2 worker).
What is a Corp-to-Corp (C2C) Arrangement?
A Corp-to-Corp arrangement is a business-to-business relationship. Instead of hiring an individual, a company contracts with another business entity—such as a Limited Liability Company (LLC) or an S-Corp—to provide a service. The person performing the work is an employee or owner of that second company.
The hiring company pays the contractor’s corporation, not the individual directly. The corporation then handles all the payroll, taxes, and other administrative burdens for its employee(s), including the person performing the work.
C2C vs. 1099: The Key Differences
The core distinction is legal and financial.
- Relationship: A 1099 is a contract between a company and an individual. A C2C is a contract between two separate business entities.
- Liability & Risk: In a C2C arrangement, the hiring company has less risk of misclassifying the worker as an employee because they’re contracting with a legitimate business, not a person. This shifts more of the legal and financial responsibility to the contractor’s own corporation.
- Taxes: A 1099 contractor pays their own self-employment taxes. In a C2C setup, the contractor’s corporation is responsible for managing payroll and employment taxes, and the individual often receives a W-2 from their own corporation.
- Administration: A C2C arrangement requires the contractor to formally set up and manage a business entity, which comes with more administrative overhead. A 1099 contractor, as a sole proprietor, has less setup and paperwork.
