LLC Vendor to Owner Change

To switch someone from a vendor to an owner, you need to change how you pay them. Pay them through equity accounts instead. First, handle his vendor profile by choosing one of the following methods:

• Safely make the vendor inactive. This does not delete him or erase his history; all past bills, checks, and 1099-NEC data remain fully intact in your reports. It simply hides his name from active dropdown lists so nobody accidentally pays him as a vendor.

• Keep his profile visible in your active Vendor List to preserve his historical vendor details. Double-click his profile and uncheck the box for "Vendor eligible for 1099". This ensures future transactions will not accidentally trigger a 1099-NEC at year-end.

Second, set up an Owner's Equity / Draw account for his distributions:

1. Go to the Lists menu, select Chart of Accounts.
2. Click the Account dropdown at the bottom left and select New.
3. Choose Equity as the account type, then click Continue.
4. Name the account something distinct, such as [Son's Name] - Owner's Draws.
5. 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.

Let me know how it goes or if you have other questions.

Since your son became an owner of the LLC in 2026, you should stop treating him as a 1099 vendor from the date of ownership. In QuickBooks Desktop, make the vendor inactive and set him up as an Owner/Member under the appropriate equity account. Any payments made to him after he became an owner should generally be recorded as owner distributions/draws or guaranteed payments, depending on the LLC’s tax structure.

The exact treatment depends on whether the LLC is taxed as a partnership, S-Corp, or C-Corp, so confirm the setup with your CPA.