LLC Vendor to Owner Change

To switch someone from a vendor to an owner, you need to change how you pay them. Start by handling the vendor profile using one of the following options.

First, you can safely make the vendor inactive. This hides their name so no one pays them by mistake, but it keeps all past bills, checks, and 1099 data safe in your reports. QuickBooks will not let you use the exact same name twice. To avoid duplicate errors when writing checks, you can create a new profile under the Other Names list with a small change, such as adding the word owner to the end.

Second, keep the profile active to preserve their historical vendor details. Make sure to uncheck the "Vendor eligible for 1099" box in the profile. This ensures future transactions will not accidentally trigger a 1099-NEC at year-end.

Then, set up an Owner's Equity  account for the distributions:

1. Go to the Lists menu and select Chart of Accounts.
2. Click the Account dropdown at the bottom left and select New.
3. Choose an account type, then click Continue.
4. Name the account Owner's Draws or something distinct.
5. Complete the account details and click Save & Close.

Moving forward, route any distributed funds through this equity account instead of vendor expenses. Refer to Step 2 in this article for instructions on how to record them in QuickBooks Desktop: Set up and pay an owner's draw.

Don't hesitate to reply if you need further assistance.